Correlation Between Aedas Homes and Renesas Electronics

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

Diversification Opportunities for Aedas Homes and Renesas Electronics

0.53

Correlation Coefficient

Aedas Homes  Renesas Electronics

Very weak diversification

The 3 months correlation between Aedas and Renesas is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Aedas Homes SA and Renesas Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Renesas Electronics 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 Renesas Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Renesas Electronics has no effect on the direction of Aedas Homes i.e., Aedas Homes and Renesas Electronics go up and down completely randomly.

Pair Corralation between Aedas Homes and Renesas Electronics

Assuming the 90 days horizon Aedas Homes is expected to generate 1.09 times less return on investment than Renesas Electronics. But when comparing it to its historical volatility, Aedas Homes SA is 1.66 times less risky than Renesas Electronics. It trades about 0.14 of its potential returns per unit of risk. Renesas Electronics is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,213  in Renesas Electronics on December 21, 2024 and sell it today you would earn a total of  210.00  from holding Renesas Electronics or generate 17.31% 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.  Renesas Electronics

Aedas Homes SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aedas Homes SA are ranked lower than 11 (%) 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.

Renesas Electronics

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Renesas Electronics are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Renesas Electronics reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aedas Homes and Renesas Electronics

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

The idea behind Aedas Homes SA and Renesas Electronics 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .