Correlation Between Aedas Homes and Lennar

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

By analyzing existing cross correlation between Aedas Homes SA and Lennar, you can compare the effects of market volatilities on Aedas Homes and Lennar 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 Lennar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aedas Homes and Lennar.

Diversification Opportunities for Aedas Homes and Lennar

-0.09

Correlation Coefficient

Aedas Homes  Lennar

Good diversification

The 3 months correlation between Aedas and Lennar is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Aedas Homes SA and Lennar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lennar 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 SA are associated (or correlated) with Lennar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lennar has no effect on the direction of Aedas Homes i.e., Aedas Homes and Lennar go up and down completely randomly.

Pair Corralation between Aedas Homes and Lennar

Assuming the 90 days horizon Aedas Homes is expected to generate 2.32 times less return on investment than Lennar. In addition to that, Aedas Homes is 1.05 times more volatile than Lennar. It trades about 0.01 of its total potential returns per unit of risk. Lennar is currently generating about 0.03 per unit of volatility. If you would invest  16,229  in Lennar on September 3, 2024 and sell it today you would earn a total of  347.00  from holding Lennar or generate 2.14% return on investment over 90 days.

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

Aedas Homes SA  vs.  Lennar

Aedas Homes SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aedas Homes SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Aedas Homes is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Lennar

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lennar are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Lennar is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Aedas Homes and Lennar

The main advantage of trading using opposite Aedas Homes and Lennar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aedas Homes position performs unexpectedly, Lennar 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 Lennar will offset losses from the drop in Lennar's long position.

The idea behind Aedas Homes SA and Lennar 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.

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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.