Correlation Between Auddia and United Homes

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

By analyzing existing cross correlation between Auddia Inc and United Homes Group, you can compare the effects of market volatilities on Auddia and United 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 Auddia with a short position of United Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Auddia and United Homes.

Diversification Opportunities for Auddia and United Homes

0.12

Correlation Coefficient

Auddia  United Homes

Average diversification

The 3 months correlation between Auddia and United is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Auddia Inc and United Homes Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Homes Group and Auddia 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 Auddia Inc are associated (or correlated) with United Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Homes Group has no effect on the direction of Auddia i.e., Auddia and United Homes go up and down completely randomly.

Pair Corralation between Auddia and United Homes

Assuming the 90 days horizon Auddia Inc is expected to generate 4.36 times more return on investment than United Homes. However, Auddia is 4.36 times more volatile than United Homes Group. It trades about 0.01 of its potential returns per unit of risk. United Homes Group is currently generating about -0.04 per unit of risk. If you would invest  5.39  in Auddia Inc on September 17, 2024 and sell it today you would lose (2.89) from holding Auddia Inc or give up 53.62% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	67.19%
Values	Daily Returns

Auddia Inc  vs.  United Homes Group

Auddia Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Auddia Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly weak fundamental indicators, Auddia showed solid returns over the last few months and may actually be approaching a breakup point.

United Homes Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United Homes Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's technical indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Auddia and United Homes

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

The idea behind Auddia Inc and United Homes Group 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.