Correlation Between Aedas Homes and SPARTAN STORES

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

Diversification Opportunities for Aedas Homes and SPARTAN STORES

0.34

Correlation Coefficient

Aedas Homes  SPARTAN STORES

Weak diversification

The 3 months correlation between Aedas and SPARTAN is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Aedas Homes SA and SPARTAN STORES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPARTAN STORES 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 SPARTAN STORES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPARTAN STORES has no effect on the direction of Aedas Homes i.e., Aedas Homes and SPARTAN STORES go up and down completely randomly.

Pair Corralation between Aedas Homes and SPARTAN STORES

Assuming the 90 days horizon Aedas Homes SA is expected to generate 0.9 times more return on investment than SPARTAN STORES. However, Aedas Homes SA is 1.11 times less risky than SPARTAN STORES. It trades about 0.11 of its potential returns per unit of risk. SPARTAN STORES is currently generating about -0.03 per unit of risk. If you would invest  1,026  in Aedas Homes SA on October 10, 2024 and sell it today you would earn a total of  1,554  from holding Aedas Homes SA or generate 151.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Aedas Homes SA  vs.  SPARTAN STORES

Aedas Homes SA

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Aedas Homes SA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Aedas Homes may actually be approaching a critical reversion point that can send shares even higher in February 2025.

SPARTAN STORES

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPARTAN STORES has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's forward-looking indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Aedas Homes and SPARTAN STORES

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

The idea behind Aedas Homes SA and SPARTAN STORES 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 .