Correlation Between Alfi and AES

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Can any of the company-specific risk be diversified away by investing in both Alfi 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 Alfi and AES into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alfi Inc and The AES, you can compare the effects of market volatilities on Alfi 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 Alfi with a short position of AES. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alfi and AES.

Diversification Opportunities for Alfi and AES

-0.47
  Correlation Coefficient

Very good diversification

The 3 months correlation between Alfi and AES is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Alfi Inc and The AES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AES and Alfi 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 Alfi Inc 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 Alfi i.e., Alfi and AES go up and down completely randomly.

Pair Corralation between Alfi and AES

Considering the 90-day investment horizon Alfi Inc is expected to under-perform the AES. In addition to that, Alfi is 12.67 times more volatile than The AES. It trades about -0.25 of its total potential returns per unit of risk. The AES is currently generating about 0.11 per unit of volatility. If you would invest  2,678  in The AES on September 8, 2022 and sell it today you would earn a total of  120.00  from holding The AES or generate 4.48% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Alfi Inc  vs.  The AES

 Performance (%) 
       Timeline  
Alfi Inc 
Alfi Performance
0 of 100
Over the last 90 days Alfi Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's essential indicators remain rather sound which may send shares a bit higher in January 2023. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Alfi Price Channel

AES 
AES Performance
2 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in The AES are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, AES is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

AES Price Channel

Alfi and AES Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Alfi and AES

The main advantage of trading using opposite Alfi and AES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alfi 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.
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The idea behind Alfi Inc and The AES pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..

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