Correlation Between Aena SME and HomeToGo

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

By analyzing existing cross correlation between Aena SME SA and HomeToGo SE, you can compare the effects of market volatilities on Aena SME and HomeToGo 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 Aena SME with a short position of HomeToGo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aena SME and HomeToGo.

Diversification Opportunities for Aena SME and HomeToGo

0.64

Correlation Coefficient

Aena SME  HomeToGo

Poor diversification

The 3 months correlation between Aena and HomeToGo is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Aena SME SA and HomeToGo SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HomeToGo SE and Aena SME 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 Aena SME SA are associated (or correlated) with HomeToGo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HomeToGo SE has no effect on the direction of Aena SME i.e., Aena SME and HomeToGo go up and down completely randomly.

Pair Corralation between Aena SME and HomeToGo

Assuming the 90 days horizon Aena SME is expected to generate 1.63 times less return on investment than HomeToGo. But when comparing it to its historical volatility, Aena SME SA is 2.94 times less risky than HomeToGo. It trades about 0.25 of its potential returns per unit of risk. HomeToGo SE is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  179.00  in HomeToGo SE on September 4, 2024 and sell it today you would earn a total of  43.00  from holding HomeToGo SE or generate 24.02% return on investment over 90 days.

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

Aena SME SA  vs.  HomeToGo SE

Aena SME SA

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aena SME SA are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Aena SME reported solid returns over the last few months and may actually be approaching a breakup point.

HomeToGo SE

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HomeToGo SE are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical and fundamental indicators, HomeToGo unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aena SME and HomeToGo

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

The idea behind Aena SME SA and HomeToGo SE 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.