Correlation Between Neinor Homes and Aedas Homes

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

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

Diversification Opportunities for Neinor Homes and Aedas Homes

0.98

Correlation Coefficient

Neinor Homes  Aedas Homes

Almost no diversification

The 3 months correlation between Neinor and Aedas is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Neinor Homes SLU 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 Neinor Homes 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 Neinor Homes SLU 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 Neinor Homes i.e., Neinor Homes and Aedas Homes go up and down completely randomly.

Pair Corralation between Neinor Homes and Aedas Homes

Assuming the 90 days trading horizon Neinor Homes is expected to generate 1.03 times less return on investment than Aedas Homes. But when comparing it to its historical volatility, Neinor Homes SLU is 1.29 times less risky than Aedas Homes. It trades about 0.31 of its potential returns per unit of risk. Aedas Homes SL is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  1,710  in Aedas Homes SL on March 14, 2024 and sell it today you would earn a total of  465.00  from holding Aedas Homes SL or generate 27.19% return on investment over 90 days.

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

Neinor Homes SLU  vs.  Aedas Homes SL

Neinor Homes SLU

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Neinor Homes SLU are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Neinor Homes exhibited solid returns over the last few months and may actually be approaching a breakup point.

Aedas Homes SL

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aedas Homes SL are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Aedas Homes displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Neinor Homes and Aedas Homes

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

Check out your portfolio center.

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.