Correlation Between Aedas Homes and Atlas Copco

Can any of the company-specific risk be diversified away by investing in both Aedas Homes and Atlas Copco 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 Aedas Homes and Atlas Copco into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Aedas Homes SA and Atlas Copco A, you can compare the effects of market volatilities on Aedas Homes and Atlas Copco 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 Aedas Homes with a short position of Atlas Copco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aedas Homes and Atlas Copco.

Diversification Opportunities for Aedas Homes and Atlas Copco

0.47

Correlation Coefficient

Aedas Homes  Atlas Copco

Very weak diversification

The 3 months correlation between Aedas and Atlas is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Aedas Homes SA and Atlas Copco A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atlas Copco A and Aedas Homes 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 Aedas Homes SA are associated (or correlated) with Atlas Copco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atlas Copco A has no effect on the direction of Aedas Homes i.e., Aedas Homes and Atlas Copco go up and down completely randomly.

Pair Corralation between Aedas Homes and Atlas Copco

Assuming the 90 days horizon Aedas Homes is expected to generate 1.3 times less return on investment than Atlas Copco. But when comparing it to its historical volatility, Aedas Homes SA is 1.22 times less risky than Atlas Copco. It trades about 0.06 of its potential returns per unit of risk. Atlas Copco A is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,430  in Atlas Copco A on December 26, 2024 and sell it today you would earn a total of  120.00  from holding Atlas Copco A or generate 8.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Aedas Homes SA  vs.  Atlas Copco A

Aedas Homes SA

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Aedas Homes SA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Aedas Homes may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Atlas Copco A

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Atlas Copco A are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Atlas Copco may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Aedas Homes and Atlas Copco

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

The idea behind Aedas Homes SA and Atlas Copco A 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.