Correlation Between Caixabank and Aedas Homes

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

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

Diversification Opportunities for Caixabank and Aedas Homes

0.34

Correlation Coefficient

Caixabank  Aedas Homes

Weak diversification

The 3 months correlation between Caixabank and Aedas is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Caixabank SA and Aedas Homes SL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aedas Homes SL and Caixabank 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 Caixabank SA are associated (or correlated) with Aedas Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aedas Homes SL has no effect on the direction of Caixabank i.e., Caixabank and Aedas Homes go up and down completely randomly.

Pair Corralation between Caixabank and Aedas Homes

Assuming the 90 days trading horizon Caixabank SA is expected to under-perform the Aedas Homes. In addition to that, Caixabank is 1.33 times more volatile than Aedas Homes SL. It trades about -0.01 of its total potential returns per unit of risk. Aedas Homes SL is currently generating about 0.04 per unit of volatility. If you would invest  2,430  in Aedas Homes SL on September 14, 2024 and sell it today you would earn a total of  85.00  from holding Aedas Homes SL or generate 3.5% return on investment over 90 days.

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

Caixabank SA  vs.  Aedas Homes SL

Caixabank SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Caixabank SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Caixabank is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

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.

Pair Trading with Caixabank and Aedas Homes

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

The idea behind Caixabank SA and Aedas Homes SL 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.