Correlation Between H2O America and AES
Can any of the company-specific risk be diversified away by investing in both H2O America 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 H2O America and AES into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between H2O America and The AES, you can compare the effects of market volatilities on H2O America 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 H2O America with a short position of AES. Check out your portfolio center. Please also check ongoing floating volatility patterns of H2O America and AES.
Diversification Opportunities for H2O America and AES
-0.8 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between H2O and AES is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding H2O America and The AES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AES and H2O America 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 H2O America 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 H2O America i.e., H2O America and AES go up and down completely randomly.
Pair Corralation between H2O America and AES
Considering the 90-day investment horizon H2O America is expected to under-perform the AES. But the stock apears to be less risky and, when comparing its historical volatility, H2O America is 2.53 times less risky than AES. The stock trades about -0.07 of its potential returns per unit of risk. The The AES is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1,139 in The AES on June 12, 2025 and sell it today you would earn a total of 144.00 from holding The AES or generate 12.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
H2O America vs. The AES
Performance |
| Timeline |
| H2O America |
| AES |
H2O America and AES Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with H2O America and AES
The main advantage of trading using opposite H2O America and AES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if H2O America 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.| H2O America vs. Cadiz Depositary Shares | H2O America vs. Essential Utilities | H2O America vs. American Water Works | H2O America vs. American States Water |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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