Correlation Between Aedas Homes and Carsales
Can any of the company-specific risk be diversified away by investing in both Aedas Homes and Carsales 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 Carsales 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 CarsalesCom, you can compare the effects of market volatilities on Aedas Homes and Carsales 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 Carsales. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aedas Homes and Carsales.
Diversification Opportunities for Aedas Homes and Carsales
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Aedas and Carsales is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Aedas Homes SA and CarsalesCom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarsalesCom 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 Carsales. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CarsalesCom has no effect on the direction of Aedas Homes i.e., Aedas Homes and Carsales go up and down completely randomly.
Pair Corralation between Aedas Homes and Carsales
Assuming the 90 days horizon Aedas Homes SA is expected to under-perform the Carsales. In addition to that, Aedas Homes is 1.36 times more volatile than CarsalesCom. It trades about -0.13 of its total potential returns per unit of risk. CarsalesCom is currently generating about 0.35 per unit of volatility. If you would invest 2,240 in CarsalesCom on August 29, 2024 and sell it today you would earn a total of 240.00 from holding CarsalesCom or generate 10.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aedas Homes SA vs. CarsalesCom
Performance |
| Timeline |
| Aedas Homes SA |
| CarsalesCom |
Aedas Homes and Carsales Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aedas Homes and Carsales
The main advantage of trading using opposite Aedas Homes and Carsales positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aedas Homes position performs unexpectedly, Carsales 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 Carsales will offset losses from the drop in Carsales' long position.The idea behind Aedas Homes SA and CarsalesCom 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.| Carsales vs. CapitaLand Investment Limited | Carsales vs. Genco Shipping Trading | Carsales vs. MGIC INVESTMENT | Carsales vs. WisdomTree Investments |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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