Correlation Between Aedas Homes and Adriano Care

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

Diversification Opportunities for Aedas Homes and Adriano Care

0.85

Correlation Coefficient

Aedas Homes  Adriano Care

Very poor diversification

The 3 months correlation between Aedas and Adriano is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Aedas Homes SL and Adriano Care SOCIMI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adriano Care SOCIMI 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 Adriano Care. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adriano Care SOCIMI has no effect on the direction of Aedas Homes i.e., Aedas Homes and Adriano Care go up and down completely randomly.

Pair Corralation between Aedas Homes and Adriano Care

Assuming the 90 days trading horizon Aedas Homes SL is expected to generate 12.9 times more return on investment than Adriano Care. However, Aedas Homes is 12.9 times more volatile than Adriano Care SOCIMI. It trades about 0.15 of its potential returns per unit of risk. Adriano Care SOCIMI is currently generating about 0.13 per unit of risk. If you would invest  2,388  in Aedas Homes SL on December 2, 2024 and sell it today you would earn a total of  377.00  from holding Aedas Homes SL or generate 15.79% return on investment over 90 days.

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

Aedas Homes SL  vs.  Adriano Care SOCIMI

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 12 (%) 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.

Adriano Care SOCIMI

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Adriano Care SOCIMI are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Adriano Care 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 Adriano Care

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

The idea behind Aedas Homes SL and Adriano Care SOCIMI 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.