Correlation Between Aedas Homes and Distribuidora Internacional

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

By analyzing existing cross correlation between Aedas Homes SL and Distribuidora Internacional de, you can compare the effects of market volatilities on Aedas Homes and Distribuidora Internacional 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 Distribuidora Internacional. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aedas Homes and Distribuidora Internacional.

Diversification Opportunities for Aedas Homes and Distribuidora Internacional

0.3

Correlation Coefficient

Aedas Homes  Distribuidora Internacional

Weak diversification

The 3 months correlation between Aedas and Distribuidora is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Aedas Homes SL and Distribuidora Internacional de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Distribuidora Internacional 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 SL are associated (or correlated) with Distribuidora Internacional. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Distribuidora Internacional has no effect on the direction of Aedas Homes i.e., Aedas Homes and Distribuidora Internacional go up and down completely randomly.

Pair Corralation between Aedas Homes and Distribuidora Internacional

Assuming the 90 days trading horizon Aedas Homes is expected to generate 4.59 times less return on investment than Distribuidora Internacional. But when comparing it to its historical volatility, Aedas Homes SL is 1.45 times less risky than Distribuidora Internacional. It trades about 0.08 of its potential returns per unit of risk. Distribuidora Internacional de is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  1.24  in Distribuidora Internacional de on October 27, 2024 and sell it today you would earn a total of  0.57  from holding Distribuidora Internacional de or generate 45.97% 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 SL  vs.  Distribuidora Internacional de

Aedas Homes SL

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Aedas Homes SL are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady primary indicators, Aedas Homes may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Distribuidora Internacional

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Distribuidora Internacional de are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Distribuidora Internacional exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aedas Homes and Distribuidora Internacional

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

The idea behind Aedas Homes SL and Distribuidora Internacional de 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.