Correlation Between Aedas Homes and Meridia Real

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

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

Diversification Opportunities for Aedas Homes and Meridia Real

-0.38

Correlation Coefficient

Aedas Homes  Meridia Real

Very good diversification

The 3 months correlation between Aedas and Meridia is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Aedas Homes SL and Meridia Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meridia Real Estate 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 SL are associated (or correlated) with Meridia Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meridia Real Estate has no effect on the direction of Aedas Homes i.e., Aedas Homes and Meridia Real go up and down completely randomly.

Pair Corralation between Aedas Homes and Meridia Real

Assuming the 90 days trading horizon Aedas Homes is expected to generate 2.73 times less return on investment than Meridia Real. In addition to that, Aedas Homes is 1.28 times more volatile than Meridia Real Estate. It trades about 0.04 of its total potential returns per unit of risk. Meridia Real Estate is currently generating about 0.14 per unit of volatility. If you would invest  79.00  in Meridia Real Estate on September 16, 2024 and sell it today you would earn a total of  8.00  from holding Meridia Real Estate or generate 10.13% return on investment over 90 days.

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

Aedas Homes SL  vs.  Meridia Real Estate

Aedas Homes SL

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Aedas Homes SL are ranked lower than 3 (%) 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.

Meridia Real Estate

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Meridia Real Estate are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Meridia Real may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Aedas Homes and Meridia Real

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

The idea behind Aedas Homes SL and Meridia Real Estate 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.