Correlation Between Aedas Homes and Brinker International
Can any of the company-specific risk be diversified away by investing in both Aedas Homes and Brinker International 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 Aedas Homes and Brinker International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aedas Homes SA and Brinker International, you can compare the effects of market volatilities on Aedas Homes and Brinker International 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 Aedas Homes with a short position of Brinker International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aedas Homes and Brinker International.
Diversification Opportunities for Aedas Homes and Brinker International
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Aedas and Brinker is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Aedas Homes SA and Brinker International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brinker International and Aedas 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 Aedas Homes SA are associated (or correlated) with Brinker International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brinker International has no effect on the direction of Aedas Homes i.e., Aedas Homes and Brinker International go up and down completely randomly.
Pair Corralation between Aedas Homes and Brinker International
Assuming the 90 days horizon Aedas Homes is expected to generate 3.04 times less return on investment than Brinker International. But when comparing it to its historical volatility, Aedas Homes SA is 1.93 times less risky than Brinker International. It trades about 0.13 of its potential returns per unit of risk. Brinker International is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 4,540 in Brinker International on September 24, 2024 and sell it today you would earn a total of 8,160 from holding Brinker International or generate 179.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aedas Homes SA vs. Brinker International
Performance |
| Timeline |
| Aedas Homes SA |
| Brinker International |
Aedas Homes and Brinker International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aedas Homes and Brinker International
The main advantage of trading using opposite Aedas Homes and Brinker International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aedas Homes position performs unexpectedly, Brinker International 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 Brinker International will offset losses from the drop in Brinker International's long position.The idea behind Aedas Homes SA and Brinker International 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.| Brinker International vs. BORR DRILLING NEW | Brinker International vs. American Homes 4 | Brinker International vs. LGI Homes | Brinker International vs. Aedas Homes SA |
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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