Correlation Between Catenon SA and Aedas Homes

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

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

Diversification Opportunities for Catenon SA and Aedas Homes

-0.51

Correlation Coefficient

Catenon SA  Aedas Homes

Excellent diversification

The 3 months correlation between Catenon and Aedas is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Catenon 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 Catenon SA 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 Catenon 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 Catenon SA i.e., Catenon SA and Aedas Homes go up and down completely randomly.

Pair Corralation between Catenon SA and Aedas Homes

Assuming the 90 days trading horizon Catenon SA is expected to under-perform the Aedas Homes. In addition to that, Catenon SA is 1.7 times more volatile than Aedas Homes SL. It trades about -0.03 of its total potential returns per unit of risk. Aedas Homes SL is currently generating about 0.03 per unit of volatility. If you would invest  2,455  in Aedas Homes SL on September 17, 2024 and sell it today you would earn a total of  50.00  from holding Aedas Homes SL or generate 2.04% return on investment over 90 days.

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

Catenon SA  vs.  Aedas Homes SL

Catenon SA

Risk-Adjusted Performance

0 of 100

Very Weak

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

Aedas Homes SL

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aedas Homes SL are ranked lower than 2 (%) 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 Catenon SA and Aedas Homes

The main advantage of trading using opposite Catenon SA and Aedas Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Catenon SA 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 Catenon 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.