Correlation Between Warehouses and Aedifica

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

By analyzing existing cross correlation between Warehouses de Pauw and Aedifica, you can compare the effects of market volatilities on Warehouses and Aedifica 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 Warehouses with a short position of Aedifica. Check out your portfolio center. Please also check ongoing floating volatility patterns of Warehouses and Aedifica.

Diversification Opportunities for Warehouses and Aedifica

0.81

Correlation Coefficient

Warehouses  Aedifica

Very poor diversification

The 3 months correlation between Warehouses and Aedifica is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Warehouses de Pauw and Aedifica in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aedifica and Warehouses 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 Warehouses de Pauw are associated (or correlated) with Aedifica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aedifica has no effect on the direction of Warehouses i.e., Warehouses and Aedifica go up and down completely randomly.

Pair Corralation between Warehouses and Aedifica

Assuming the 90 days trading horizon Warehouses is expected to generate 6.65 times less return on investment than Aedifica. In addition to that, Warehouses is 1.19 times more volatile than Aedifica. It trades about 0.01 of its total potential returns per unit of risk. Aedifica is currently generating about 0.11 per unit of volatility. If you would invest  5,810  in Aedifica on November 28, 2024 and sell it today you would earn a total of  435.00  from holding Aedifica or generate 7.49% return on investment over 90 days.

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

Warehouses de Pauw  vs.  Aedifica

Warehouses de Pauw

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Warehouses de Pauw are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Warehouses is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Aedifica

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aedifica are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak fundamental indicators, Aedifica may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Warehouses and Aedifica

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

The idea behind Warehouses de Pauw and Aedifica 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.