Correlation Between Aedas Homes and Pescanova

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

Diversification Opportunities for Aedas Homes and Pescanova

0.67

Correlation Coefficient

Aedas Homes  Pescanova

Poor diversification

The 3 months correlation between Aedas and Pescanova is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Aedas Homes SL and Pescanova SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pescanova SA 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 Pescanova. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pescanova SA has no effect on the direction of Aedas Homes i.e., Aedas Homes and Pescanova go up and down completely randomly.

Pair Corralation between Aedas Homes and Pescanova

Assuming the 90 days trading horizon Aedas Homes SL is expected to generate 0.58 times more return on investment than Pescanova. However, Aedas Homes SL is 1.73 times less risky than Pescanova. It trades about 0.15 of its potential returns per unit of risk. Pescanova SA is currently generating about 0.01 per unit of risk. If you would invest  2,456  in Aedas Homes SL on December 4, 2024 and sell it today you would earn a total of  374.00  from holding Aedas Homes SL or generate 15.23% 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.  Pescanova SA

Aedas Homes SL

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aedas Homes SL are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady primary indicators, Aedas Homes displayed solid returns over the last few months and may actually be approaching a breakup point.

Pescanova SA

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pescanova SA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Pescanova is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Aedas Homes and Pescanova

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

The idea behind Aedas Homes SL and Pescanova 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.

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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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.