Correlation Between Aedas Homes and VIVA WINE

Can any of the company-specific risk be diversified away by investing in both Aedas Homes and VIVA WINE 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 VIVA WINE 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 VIVA WINE GROUP, you can compare the effects of market volatilities on Aedas Homes and VIVA WINE 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 VIVA WINE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aedas Homes and VIVA WINE.

Diversification Opportunities for Aedas Homes and VIVA WINE

0.38

Correlation Coefficient

Aedas Homes  VIVA WINE

Weak diversification

The 3 months correlation between Aedas and VIVA is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Aedas Homes SA and VIVA WINE GROUP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VIVA WINE GROUP 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 VIVA WINE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VIVA WINE GROUP has no effect on the direction of Aedas Homes i.e., Aedas Homes and VIVA WINE go up and down completely randomly.

Pair Corralation between Aedas Homes and VIVA WINE

Assuming the 90 days horizon Aedas Homes SA is expected to generate 1.2 times more return on investment than VIVA WINE. However, Aedas Homes is 1.2 times more volatile than VIVA WINE GROUP. It trades about 0.11 of its potential returns per unit of risk. VIVA WINE GROUP is currently generating about 0.12 per unit of risk. If you would invest  2,500  in Aedas Homes SA on December 25, 2024 and sell it today you would earn a total of  315.00  from holding Aedas Homes SA or generate 12.6% return on investment over 90 days.

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

Aedas Homes SA  vs.  VIVA WINE GROUP

Aedas Homes SA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aedas Homes SA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Aedas Homes reported solid returns over the last few months and may actually be approaching a breakup point.

VIVA WINE GROUP

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in VIVA WINE GROUP are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, VIVA WINE reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aedas Homes and VIVA WINE

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

The idea behind Aedas Homes SA and VIVA WINE GROUP 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.