Correlation Between Hisense Home and Aedas Homes

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

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

Diversification Opportunities for Hisense Home and Aedas Homes

0.46

Correlation Coefficient

Hisense Home  Aedas Homes

Very weak diversification

The 3 months correlation between Hisense and Aedas is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Hisense Home Appliances 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 Hisense Home 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 Hisense Home Appliances 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 Hisense Home i.e., Hisense Home and Aedas Homes go up and down completely randomly.

Pair Corralation between Hisense Home and Aedas Homes

Assuming the 90 days horizon Hisense Home Appliances is expected to generate 1.17 times more return on investment than Aedas Homes. However, Hisense Home is 1.17 times more volatile than Aedas Homes SA. It trades about 0.25 of its potential returns per unit of risk. Aedas Homes SA is currently generating about 0.11 per unit of risk. If you would invest  297.00  in Hisense Home Appliances on October 24, 2024 and sell it today you would earn a total of  36.00  from holding Hisense Home Appliances or generate 12.12% return on investment over 90 days.

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

Hisense Home Appliances  vs.  Aedas Homes SA

Hisense Home Appliances

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hisense Home Appliances are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Hisense Home 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 Hisense Home and Aedas Homes

The main advantage of trading using opposite Hisense Home and Aedas Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hisense Home 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 Hisense Home Appliances 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.