Correlation Between Energy Solar and Aedas Homes

Can any of the company-specific risk be diversified away by investing in both Energy Solar 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 Energy Solar and Aedas Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Energy Solar Tech and Aedas Homes SL, you can compare the effects of market volatilities on Energy Solar 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 Energy Solar with a short position of Aedas Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energy Solar and Aedas Homes.

Diversification Opportunities for Energy Solar and Aedas Homes

-0.07

Correlation Coefficient

Energy Solar  Aedas Homes

Good diversification

The 3 months correlation between Energy and Aedas is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Energy Solar Tech 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 Energy Solar 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 Energy Solar Tech 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 Energy Solar i.e., Energy Solar and Aedas Homes go up and down completely randomly.

Pair Corralation between Energy Solar and Aedas Homes

Assuming the 90 days trading horizon Energy Solar Tech is expected to under-perform the Aedas Homes. In addition to that, Energy Solar is 1.05 times more volatile than Aedas Homes SL. It trades about -0.02 of its total potential returns per unit of risk. Aedas Homes SL is currently generating about 0.04 per unit of volatility. If you would invest  2,420  in Aedas Homes SL on August 27, 2024 and sell it today you would earn a total of  75.00  from holding Aedas Homes SL or generate 3.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Energy Solar Tech  vs.  Aedas Homes SL

Energy Solar Tech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Energy Solar Tech has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Energy Solar is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Aedas Homes SL

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Aedas Homes SL are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy primary indicators, Aedas Homes is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Energy Solar and Aedas Homes

The main advantage of trading using opposite Energy Solar and Aedas Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Energy Solar 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 Energy Solar Tech 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.