Correlation Between Aedas Homes and Mapfre

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

Diversification Opportunities for Aedas Homes and Mapfre

0.62

Correlation Coefficient

Aedas Homes  Mapfre

Poor diversification

The 3 months correlation between Aedas and Mapfre is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Aedas Homes SL and Mapfre in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mapfre 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 Mapfre. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mapfre has no effect on the direction of Aedas Homes i.e., Aedas Homes and Mapfre go up and down completely randomly.

Pair Corralation between Aedas Homes and Mapfre

Assuming the 90 days trading horizon Aedas Homes is expected to generate 2.72 times less return on investment than Mapfre. In addition to that, Aedas Homes is 1.35 times more volatile than Mapfre. It trades about 0.05 of its total potential returns per unit of risk. Mapfre is currently generating about 0.19 per unit of volatility. If you would invest  244.00  in Mapfre on December 30, 2024 and sell it today you would earn a total of  42.00  from holding Mapfre or generate 17.21% return on investment over 90 days.

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

Aedas Homes SL  vs.  Mapfre

Aedas Homes SL

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Aedas Homes SL are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, Aedas Homes is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Mapfre

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mapfre are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Mapfre exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aedas Homes and Mapfre

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

The idea behind Aedas Homes SL and Mapfre 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.