Correlation Between IND+COMMBK CHINA and Aedas Homes
Can any of the company-specific risk be diversified away by investing in both IND+COMMBK CHINA 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 IND+COMMBK CHINA and Aedas Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between INDCOMMBK CHINA ADR20 and Aedas Homes SA, you can compare the effects of market volatilities on IND+COMMBK CHINA 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 IND+COMMBK CHINA with a short position of Aedas Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of IND+COMMBK CHINA and Aedas Homes.
Diversification Opportunities for IND+COMMBK CHINA and Aedas Homes
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IND+COMMBK and Aedas is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding INDCOMMBK CHINA ADR20 and Aedas Homes SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aedas Homes SA and IND+COMMBK CHINA 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 INDCOMMBK CHINA ADR20 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 SA has no effect on the direction of IND+COMMBK CHINA i.e., IND+COMMBK CHINA and Aedas Homes go up and down completely randomly.
Pair Corralation between IND+COMMBK CHINA and Aedas Homes
Assuming the 90 days trading horizon IND+COMMBK CHINA is expected to generate 2.06 times less return on investment than Aedas Homes. In addition to that, IND+COMMBK CHINA is 1.35 times more volatile than Aedas Homes SA. It trades about 0.04 of its total potential returns per unit of risk. Aedas Homes SA is currently generating about 0.12 per unit of volatility. If you would invest 1,192 in Aedas Homes SA on August 31, 2024 and sell it today you would earn a total of 1,283 from holding Aedas Homes SA or generate 107.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
INDCOMMBK CHINA ADR20 vs. Aedas Homes SA
Performance |
| Timeline |
| INDCOMMBK CHINA ADR20 |
| Aedas Homes SA |
IND+COMMBK CHINA and Aedas Homes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IND+COMMBK CHINA and Aedas Homes
The main advantage of trading using opposite IND+COMMBK CHINA and Aedas Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IND+COMMBK CHINA 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.| IND+COMMBK CHINA vs. Aedas Homes SA | IND+COMMBK CHINA vs. Check Point Software | IND+COMMBK CHINA vs. X FAB Silicon Foundries | IND+COMMBK CHINA vs. SWISS WATER DECAFFCOFFEE |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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