Correlation Between Aedas Homes and ZTO EXPRESS

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

Diversification Opportunities for Aedas Homes and ZTO EXPRESS

0.23

Correlation Coefficient

Aedas Homes  ZTO EXPRESS

Modest diversification

The 3 months correlation between Aedas and ZTO is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Aedas Homes SA and ZTO EXPRESS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZTO EXPRESS 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 ZTO EXPRESS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZTO EXPRESS has no effect on the direction of Aedas Homes i.e., Aedas Homes and ZTO EXPRESS go up and down completely randomly.

Pair Corralation between Aedas Homes and ZTO EXPRESS

Assuming the 90 days horizon Aedas Homes SA is expected to generate 1.7 times more return on investment than ZTO EXPRESS. However, Aedas Homes is 1.7 times more volatile than ZTO EXPRESS. It trades about 0.24 of its potential returns per unit of risk. ZTO EXPRESS is currently generating about 0.03 per unit of risk. If you would invest  2,401  in Aedas Homes SA on October 12, 2024 and sell it today you would earn a total of  199.00  from holding Aedas Homes SA or generate 8.29% 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.  ZTO EXPRESS

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 unsteady basic indicators, Aedas Homes may actually be approaching a critical reversion point that can send shares even higher in February 2025.

ZTO EXPRESS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ZTO EXPRESS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Aedas Homes and ZTO EXPRESS

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

The idea behind Aedas Homes SA and ZTO EXPRESS 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.