Correlation Between Aedas Homes and Lar Espana
Can any of the company-specific risk be diversified away by investing in both Aedas Homes and Lar Espana 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 Lar Espana 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 Lar Espana Real, you can compare the effects of market volatilities on Aedas Homes and Lar Espana 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 Lar Espana. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aedas Homes and Lar Espana.
Diversification Opportunities for Aedas Homes and Lar Espana
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Aedas and Lar is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Aedas Homes SL and Lar Espana Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lar Espana Real 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 Lar Espana. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lar Espana Real has no effect on the direction of Aedas Homes i.e., Aedas Homes and Lar Espana go up and down completely randomly.
Pair Corralation between Aedas Homes and Lar Espana
Assuming the 90 days trading horizon Aedas Homes is expected to generate 1.14 times less return on investment than Lar Espana. But when comparing it to its historical volatility, Aedas Homes SL is 1.06 times less risky than Lar Espana. It trades about 0.08 of its potential returns per unit of risk. Lar Espana Real is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 703.00 in Lar Espana Real on August 31, 2024 and sell it today you would earn a total of 122.00 from holding Lar Espana Real or generate 17.35% 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 SL vs. Lar Espana Real
Performance |
| Timeline |
| Aedas Homes SL |
| Lar Espana Real |
Aedas Homes and Lar Espana Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aedas Homes and Lar Espana
The main advantage of trading using opposite Aedas Homes and Lar Espana positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aedas Homes position performs unexpectedly, Lar Espana 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 Lar Espana will offset losses from the drop in Lar Espana's long position.| Aedas Homes vs. Neinor Homes SLU | Aedas Homes vs. Metrovacesa SA | Aedas Homes vs. Merlin Properties SOCIMI | Aedas Homes vs. Lar Espana Real |
| Lar Espana vs. Merlin Properties SOCIMI | Lar Espana vs. Inmobiliaria Colonial SA | Lar Espana vs. Cia de Distribucion | Lar Espana vs. ENCE Energa y |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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