Correlation Between Global Ship and Aedas Homes

Can any of the company-specific risk be diversified away by investing in both Global Ship and Aedas Homes 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 Global Ship and Aedas Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Global Ship Lease and Aedas Homes SA, you can compare the effects of market volatilities on Global Ship and Aedas Homes 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 Global Ship with a short position of Aedas Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Ship and Aedas Homes.

Diversification Opportunities for Global Ship and Aedas Homes

0.42

Correlation Coefficient

Global Ship  Aedas Homes

Very weak diversification

The 3 months correlation between Global and Aedas is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Global Ship Lease and Aedas Homes SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aedas Homes SA and Global Ship 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 Global Ship Lease are associated (or correlated) with Aedas Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aedas Homes SA has no effect on the direction of Global Ship i.e., Global Ship and Aedas Homes go up and down completely randomly.

Pair Corralation between Global Ship and Aedas Homes

Assuming the 90 days horizon Global Ship is expected to generate 9.39 times less return on investment than Aedas Homes. But when comparing it to its historical volatility, Global Ship Lease is 1.08 times less risky than Aedas Homes. It trades about 0.01 of its potential returns per unit of risk. Aedas Homes SA is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,390  in Aedas Homes SA on September 14, 2024 and sell it today you would earn a total of  100.00  from holding Aedas Homes SA or generate 4.18% return on investment over 90 days.

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

Global Ship Lease  vs.  Aedas Homes SA

Global Ship Lease

Risk-Adjusted Performance

0 of 100

Very Weak

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

Aedas Homes SA

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Aedas Homes SA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with Global Ship and Aedas Homes

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

The idea behind Global Ship Lease and Aedas Homes SA 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.