Correlation Between Dolby Laboratories and Aedas Homes

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

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

Diversification Opportunities for Dolby Laboratories and Aedas Homes

-0.16

Correlation Coefficient

Dolby Laboratories  Aedas Homes

Good diversification

The 3 months correlation between Dolby and Aedas is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Dolby Laboratories 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 Dolby Laboratories 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 Dolby Laboratories 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 Dolby Laboratories i.e., Dolby Laboratories and Aedas Homes go up and down completely randomly.

Pair Corralation between Dolby Laboratories and Aedas Homes

Assuming the 90 days horizon Dolby Laboratories is expected to generate 0.46 times more return on investment than Aedas Homes. However, Dolby Laboratories is 2.15 times less risky than Aedas Homes. It trades about 0.22 of its potential returns per unit of risk. Aedas Homes SA is currently generating about 0.04 per unit of risk. If you would invest  7,500  in Dolby Laboratories on October 25, 2024 and sell it today you would earn a total of  300.00  from holding Dolby Laboratories or generate 4.0% return on investment over 90 days.

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

Dolby Laboratories  vs.  Aedas Homes SA

Dolby Laboratories

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dolby Laboratories are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Dolby Laboratories reported solid returns over the last few months and may actually be approaching a breakup point.

Aedas Homes SA

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aedas Homes SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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 Dolby Laboratories and Aedas Homes

The main advantage of trading using opposite Dolby Laboratories and Aedas Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dolby Laboratories 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 Dolby Laboratories 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.