Correlation Between Aldel Financial and United Homes

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

By analyzing existing cross correlation between Aldel Financial II and United Homes Group, you can compare the effects of market volatilities on Aldel Financial and United 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 Aldel Financial with a short position of United Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aldel Financial and United Homes.

Diversification Opportunities for Aldel Financial and United Homes

-0.42

Correlation Coefficient

Aldel Financial  United Homes

Very good diversification

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

Pair Corralation between Aldel Financial and United Homes

Assuming the 90 days horizon Aldel Financial is expected to generate 10.66 times less return on investment than United Homes. But when comparing it to its historical volatility, Aldel Financial II is 15.88 times less risky than United Homes. It trades about 0.2 of its potential returns per unit of risk. United Homes Group is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  416.00  in United Homes Group on October 20, 2024 and sell it today you would earn a total of  34.00  from holding United Homes Group or generate 8.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.0%
Values	Daily Returns

Aldel Financial II  vs.  United Homes Group

Aldel Financial II

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aldel Financial II are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Aldel Financial is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

United Homes Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United Homes Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's technical indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Aldel Financial and United Homes

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

The idea behind Aldel Financial II and United Homes Group 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.