Correlation Between Strategic Investments and Aedas Homes

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

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

Diversification Opportunities for Strategic Investments and Aedas Homes

0.27

Correlation Coefficient

Strategic Investments  Aedas Homes

Modest diversification

The 3 months correlation between Strategic and Aedas is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Strategic Investments AS 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 Strategic Investments 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 Strategic Investments AS 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 Strategic Investments i.e., Strategic Investments and Aedas Homes go up and down completely randomly.

Pair Corralation between Strategic Investments and Aedas Homes

Assuming the 90 days horizon Strategic Investments is expected to generate 3.98 times less return on investment than Aedas Homes. In addition to that, Strategic Investments is 2.17 times more volatile than Aedas Homes SA. It trades about 0.01 of its total potential returns per unit of risk. Aedas Homes SA is currently generating about 0.12 per unit of volatility. If you would invest  1,379  in Aedas Homes SA on September 23, 2024 and sell it today you would earn a total of  996.00  from holding Aedas Homes SA or generate 72.23% return on investment over 90 days.

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

Strategic Investments AS  vs.  Aedas Homes SA

Strategic Investments

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Strategic Investments AS are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Strategic Investments is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Aedas Homes SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aedas Homes SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Aedas Homes is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Strategic Investments and Aedas Homes

The main advantage of trading using opposite Strategic Investments and Aedas Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Strategic Investments 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 Strategic Investments AS 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.

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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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.