Correlation Between COMPASS MINERALS and Aedas Homes

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

By analyzing existing cross correlation between COMPASS MINERALS and Aedas Homes SA, you can compare the effects of market volatilities on COMPASS MINERALS and Aedas 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 COMPASS MINERALS with a short position of Aedas Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of COMPASS MINERALS and Aedas Homes.

Diversification Opportunities for COMPASS MINERALS and Aedas Homes

-0.58

Correlation Coefficient

COMPASS MINERALS  Aedas Homes

Excellent diversification

The 3 months correlation between COMPASS and Aedas is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding COMPASS MINERALS and Aedas Homes SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aedas Homes SA and COMPASS MINERALS 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 COMPASS MINERALS are associated (or correlated) with Aedas Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aedas Homes SA has no effect on the direction of COMPASS MINERALS i.e., COMPASS MINERALS and Aedas Homes go up and down completely randomly.

Pair Corralation between COMPASS MINERALS and Aedas Homes

Assuming the 90 days trading horizon COMPASS MINERALS is expected to under-perform the Aedas Homes. In addition to that, COMPASS MINERALS is 2.33 times more volatile than Aedas Homes SA. It trades about -0.17 of its total potential returns per unit of risk. Aedas Homes SA is currently generating about 0.19 per unit of volatility. If you would invest  2,440  in Aedas Homes SA on October 11, 2024 and sell it today you would earn a total of  160.00  from holding Aedas Homes SA or generate 6.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	94.44%
Values	Daily Returns

COMPASS MINERALS  vs.  Aedas Homes SA

COMPASS MINERALS

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in COMPASS MINERALS are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, COMPASS MINERALS is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Aedas Homes SA

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Aedas Homes SA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Aedas Homes may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with COMPASS MINERALS and Aedas Homes

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

The idea behind COMPASS MINERALS and Aedas Homes 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.

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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..