Correlation Between Bankinter and Aedas Homes
Can any of the company-specific risk be diversified away by investing in both Bankinter 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 Bankinter and Aedas Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bankinter and Aedas Homes SL, you can compare the effects of market volatilities on Bankinter 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 Bankinter with a short position of Aedas Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bankinter and Aedas Homes.
Diversification Opportunities for Bankinter and Aedas Homes
-0.68 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Bankinter and Aedas is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Bankinter 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 Bankinter 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 Bankinter 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 Bankinter i.e., Bankinter and Aedas Homes go up and down completely randomly.
Pair Corralation between Bankinter and Aedas Homes
Assuming the 90 days trading horizon Bankinter is expected to generate 1.16 times more return on investment than Aedas Homes. However, Bankinter is 1.16 times more volatile than Aedas Homes SL. It trades about 0.09 of its potential returns per unit of risk. Aedas Homes SL is currently generating about -0.21 per unit of risk. If you would invest 738.00 in Bankinter on August 29, 2024 and sell it today you would earn a total of 23.00 from holding Bankinter or generate 3.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bankinter vs. Aedas Homes SL
Performance |
| Timeline |
| Bankinter |
| Aedas Homes SL |
Bankinter and Aedas Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bankinter and Aedas Homes
The main advantage of trading using opposite Bankinter and Aedas Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bankinter 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 Bankinter 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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