Correlation Between Aedas Homes and Oversea Chinese

Can any of the company-specific risk be diversified away by investing in both Aedas Homes and Oversea Chinese 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 Oversea Chinese 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 Oversea Chinese Banking, you can compare the effects of market volatilities on Aedas Homes and Oversea Chinese 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 Oversea Chinese. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aedas Homes and Oversea Chinese.

Diversification Opportunities for Aedas Homes and Oversea Chinese

-0.26

Correlation Coefficient

Aedas Homes  Oversea Chinese

Very good diversification

The 3 months correlation between Aedas and Oversea is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Aedas Homes SA and Oversea Chinese Banking in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oversea Chinese Banking 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 Oversea Chinese. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oversea Chinese Banking has no effect on the direction of Aedas Homes i.e., Aedas Homes and Oversea Chinese go up and down completely randomly.

Pair Corralation between Aedas Homes and Oversea Chinese

Assuming the 90 days horizon Aedas Homes is expected to generate 3.5 times less return on investment than Oversea Chinese. In addition to that, Aedas Homes is 1.29 times more volatile than Oversea Chinese Banking. It trades about 0.03 of its total potential returns per unit of risk. Oversea Chinese Banking is currently generating about 0.15 per unit of volatility. If you would invest  1,048  in Oversea Chinese Banking on September 17, 2024 and sell it today you would earn a total of  134.00  from holding Oversea Chinese Banking or generate 12.79% 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.  Oversea Chinese Banking

Aedas Homes SA

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aedas Homes SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Oversea Chinese Banking

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Oversea Chinese Banking are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady fundamental drivers, Oversea Chinese may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Aedas Homes and Oversea Chinese

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

The idea behind Aedas Homes SA and Oversea Chinese Banking 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.