Correlation Between Nationwide Building and AES Corp
Can any of the company-specific risk be diversified away by investing in both Nationwide Building and AES Corp at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Nationwide Building and AES Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nationwide Building Society and AES Corp, you can compare the effects of market volatilities on Nationwide Building and AES Corp and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Nationwide Building with a short position of AES Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nationwide Building and AES Corp.
Diversification Opportunities for Nationwide Building and AES Corp
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between Nationwide and AES is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Nationwide Building Society and AES Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AES Corp and Nationwide Building is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Nationwide Building Society are associated (or correlated) with AES Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AES Corp has no effect on the direction of Nationwide Building i.e., Nationwide Building and AES Corp go up and down completely randomly.
Pair Corralation between Nationwide Building and AES Corp
Assuming the 90 days trading horizon Nationwide Building Society is expected to generate 0.08 times more return on investment than AES Corp. However, Nationwide Building Society is 12.2 times less risky than AES Corp. It trades about -0.03 of its potential returns per unit of risk. AES Corp is currently generating about -0.26 per unit of risk. If you would invest 13,200 in Nationwide Building Society on September 24, 2024 and sell it today you would lose (50.00) from holding Nationwide Building Society or give up 0.38% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Nationwide Building Society vs. AES Corp
Performance |
Timeline |
Nationwide Building |
AES Corp |
Nationwide Building and AES Corp Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Nationwide Building and AES Corp
The main advantage of trading using opposite Nationwide Building and AES Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nationwide Building position performs unexpectedly, AES Corp can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in AES Corp will offset losses from the drop in AES Corp's long position.Nationwide Building vs. Quadrise Plc | Nationwide Building vs. ImmuPharma PLC | Nationwide Building vs. Intuitive Investments Group | Nationwide Building vs. European Metals Holdings |
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Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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