Correlation Between Aedas Homes and VONOVIA SE

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

Diversification Opportunities for Aedas Homes and VONOVIA SE

0.08

Correlation Coefficient

Aedas Homes  VONOVIA SE

Significant diversification

The 3 months correlation between Aedas and VONOVIA is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Aedas Homes SA and VONOVIA SE ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VONOVIA SE ADR 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 VONOVIA SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VONOVIA SE ADR has no effect on the direction of Aedas Homes i.e., Aedas Homes and VONOVIA SE go up and down completely randomly.

Pair Corralation between Aedas Homes and VONOVIA SE

Assuming the 90 days horizon Aedas Homes SA is expected to generate 0.82 times more return on investment than VONOVIA SE. However, Aedas Homes SA is 1.23 times less risky than VONOVIA SE. It trades about 0.05 of its potential returns per unit of risk. VONOVIA SE ADR is currently generating about -0.08 per unit of risk. If you would invest  2,411  in Aedas Homes SA on October 5, 2024 and sell it today you would earn a total of  99.00  from holding Aedas Homes SA or generate 4.11% return on investment over 90 days.

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

Aedas Homes SA  vs.  VONOVIA SE ADR

Aedas Homes SA

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days Aedas Homes SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Aedas Homes is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

VONOVIA SE ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VONOVIA SE ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Aedas Homes and VONOVIA SE

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

The idea behind Aedas Homes SA and VONOVIA SE ADR 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..