Correlation Between Aedas Homes and Williams Sonoma

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

Diversification Opportunities for Aedas Homes and Williams Sonoma

-0.4

Correlation Coefficient

Aedas Homes  Williams Sonoma

Very good diversification

The 3 months correlation between Aedas and Williams is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Aedas Homes SA and Williams Sonoma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Williams Sonoma 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 Williams Sonoma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Williams Sonoma has no effect on the direction of Aedas Homes i.e., Aedas Homes and Williams Sonoma go up and down completely randomly.

Pair Corralation between Aedas Homes and Williams Sonoma

Assuming the 90 days horizon Aedas Homes is expected to generate 1.02 times less return on investment than Williams Sonoma. But when comparing it to its historical volatility, Aedas Homes SA is 1.08 times less risky than Williams Sonoma. It trades about 0.2 of its potential returns per unit of risk. Williams Sonoma is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  17,815  in Williams Sonoma on October 9, 2024 and sell it today you would earn a total of  1,265  from holding Williams Sonoma or generate 7.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	94.12%
Values	Daily Returns

Aedas Homes SA  vs.  Williams Sonoma

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.

Williams Sonoma

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Williams Sonoma are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Williams Sonoma unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aedas Homes and Williams Sonoma

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

The idea behind Aedas Homes SA and Williams Sonoma 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.

Check out your portfolio center.

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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..