Correlation Between Vastned Retail and Aeorema Communications

Can any of the company-specific risk be diversified away by investing in both Vastned Retail and Aeorema Communications 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 Vastned Retail and Aeorema Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Vastned Retail NV and Aeorema Communications Plc, you can compare the effects of market volatilities on Vastned Retail and Aeorema Communications 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 Vastned Retail with a short position of Aeorema Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vastned Retail and Aeorema Communications.

Diversification Opportunities for Vastned Retail and Aeorema Communications

-0.79

Correlation Coefficient

Vastned Retail  Aeorema Communications

Pay attention - limited upside

The 3 months correlation between Vastned and Aeorema is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Vastned Retail NV and Aeorema Communications Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aeorema Communications and Vastned Retail 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 Vastned Retail NV are associated (or correlated) with Aeorema Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aeorema Communications has no effect on the direction of Vastned Retail i.e., Vastned Retail and Aeorema Communications go up and down completely randomly.

Pair Corralation between Vastned Retail and Aeorema Communications

Assuming the 90 days trading horizon Vastned Retail NV is expected to generate 0.73 times more return on investment than Aeorema Communications. However, Vastned Retail NV is 1.38 times less risky than Aeorema Communications. It trades about -0.18 of its potential returns per unit of risk. Aeorema Communications Plc is currently generating about -0.21 per unit of risk. If you would invest  2,283  in Vastned Retail NV on October 10, 2024 and sell it today you would lose (105.00) from holding Vastned Retail NV or give up 4.6% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	84.21%
Values	Daily Returns

Vastned Retail NV  vs.  Aeorema Communications Plc

Vastned Retail NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vastned Retail NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Vastned Retail is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Aeorema Communications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aeorema Communications Plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Aeorema Communications is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Vastned Retail and Aeorema Communications

The main advantage of trading using opposite Vastned Retail and Aeorema Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vastned Retail position performs unexpectedly, Aeorema Communications 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 Aeorema Communications will offset losses from the drop in Aeorema Communications' long position.

The idea behind Vastned Retail NV and Aeorema Communications Plc 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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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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.