Correlation Between Aedas Homes and Ebro Foods
Can any of the company-specific risk be diversified away by investing in both Aedas Homes and Ebro Foods 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 Ebro Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aedas Homes SL and Ebro Foods, you can compare the effects of market volatilities on Aedas Homes and Ebro Foods 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 Ebro Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aedas Homes and Ebro Foods.
Diversification Opportunities for Aedas Homes and Ebro Foods
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Aedas and Ebro is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Aedas Homes SL and Ebro Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ebro Foods 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 SL are associated (or correlated) with Ebro Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ebro Foods has no effect on the direction of Aedas Homes i.e., Aedas Homes and Ebro Foods go up and down completely randomly.
Pair Corralation between Aedas Homes and Ebro Foods
Assuming the 90 days trading horizon Aedas Homes SL is expected to generate 1.98 times more return on investment than Ebro Foods. However, Aedas Homes is 1.98 times more volatile than Ebro Foods. It trades about 0.13 of its potential returns per unit of risk. Ebro Foods is currently generating about 0.05 per unit of risk. If you would invest 1,556 in Aedas Homes SL on August 26, 2024 and sell it today you would earn a total of 954.00 from holding Aedas Homes SL or generate 61.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aedas Homes SL vs. Ebro Foods
Performance |
| Timeline |
| Aedas Homes SL |
| Ebro Foods |
Aedas Homes and Ebro Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aedas Homes and Ebro Foods
The main advantage of trading using opposite Aedas Homes and Ebro Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aedas Homes position performs unexpectedly, Ebro Foods 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 Ebro Foods will offset losses from the drop in Ebro Foods' long position.| Aedas Homes vs. Neinor Homes SLU | Aedas Homes vs. Metrovacesa SA | Aedas Homes vs. Atresmedia Corporacin de |
| Ebro Foods vs. Enags SA | Ebro Foods vs. Mapfre | Ebro Foods vs. Cia de Distribucion | Ebro Foods vs. ACS Actividades de |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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