Correlation Between Labiana Health and Aedas Homes

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

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

Diversification Opportunities for Labiana Health and Aedas Homes

0.34

Correlation Coefficient

Labiana Health  Aedas Homes

Weak diversification

The 3 months correlation between Labiana and Aedas is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Labiana Health SA and Aedas Homes SL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aedas Homes SL and Labiana Health 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 Labiana Health SA 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 SL has no effect on the direction of Labiana Health i.e., Labiana Health and Aedas Homes go up and down completely randomly.

Pair Corralation between Labiana Health and Aedas Homes

Assuming the 90 days trading horizon Labiana Health SA is expected to under-perform the Aedas Homes. In addition to that, Labiana Health is 1.27 times more volatile than Aedas Homes SL. It trades about -0.02 of its total potential returns per unit of risk. Aedas Homes SL is currently generating about 0.05 per unit of volatility. If you would invest  2,550  in Aedas Homes SL on December 30, 2024 and sell it today you would earn a total of  130.00  from holding Aedas Homes SL or generate 5.1% return on investment over 90 days.

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

Labiana Health SA  vs.  Aedas Homes SL

Labiana Health SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Labiana Health SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, Labiana Health is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Aedas Homes SL

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Aedas Homes SL are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, Aedas Homes is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Labiana Health and Aedas Homes

The main advantage of trading using opposite Labiana Health and Aedas Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Labiana Health 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 Labiana Health SA and Aedas Homes SL 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.