Correlation Between Public Service and AES
Can any of the company-specific risk be diversified away by investing in both Public Service and AES 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 Public Service and AES into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Public Service Enterprise and The AES, you can compare the effects of market volatilities on Public Service and AES 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 Public Service with a short position of AES. Check out your portfolio center. Please also check ongoing floating volatility patterns of Public Service and AES.
Diversification Opportunities for Public Service and AES
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between Public and AES is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Public Service Enterprise and The AES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AES and Public Service 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 Public Service Enterprise are associated (or correlated) with AES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AES has no effect on the direction of Public Service i.e., Public Service and AES go up and down completely randomly.
Pair Corralation between Public Service and AES
Considering the 90-day investment horizon Public Service Enterprise is expected to generate 0.37 times more return on investment than AES. However, Public Service Enterprise is 2.72 times less risky than AES. It trades about 0.13 of its potential returns per unit of risk. The AES is currently generating about 0.04 per unit of risk. If you would invest 6,532 in Public Service Enterprise on January 24, 2024 and sell it today you would earn a total of 139.00 from holding Public Service Enterprise or generate 2.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Public Service Enterprise vs. The AES
Performance |
| Timeline |
| Public Service Enterprise |
| AES |
Public Service and AES Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Public Service and AES
The main advantage of trading using opposite Public Service and AES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Public Service position performs unexpectedly, AES 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 will offset losses from the drop in AES's long position.| Public Service vs. Alliant Energy Corp | Public Service vs. Pinnacle West Capital | Public Service vs. FirstEnergy | Public Service vs. Edison International |
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 AI Investment Finder module to use AI to screen and filter profitable investment opportunities.
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