Correlation Between Canadian Utilities and Aedas Homes
Can any of the company-specific risk be diversified away by investing in both Canadian Utilities 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 Canadian Utilities and Aedas Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Canadian Utilities Limited and Aedas Homes SA, you can compare the effects of market volatilities on Canadian Utilities 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 Canadian Utilities with a short position of Aedas Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian Utilities and Aedas Homes.
Diversification Opportunities for Canadian Utilities and Aedas Homes
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between Canadian and Aedas is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Utilities Limited and Aedas Homes SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aedas Homes SA and Canadian Utilities 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 Canadian Utilities Limited 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 SA has no effect on the direction of Canadian Utilities i.e., Canadian Utilities and Aedas Homes go up and down completely randomly.
Pair Corralation between Canadian Utilities and Aedas Homes
Assuming the 90 days horizon Canadian Utilities Limited is expected to generate 0.71 times more return on investment than Aedas Homes. However, Canadian Utilities Limited is 1.4 times less risky than Aedas Homes. It trades about 0.04 of its potential returns per unit of risk. Aedas Homes SA is currently generating about 0.0 per unit of risk. If you would invest 2,219 in Canadian Utilities Limited on September 23, 2024 and sell it today you would earn a total of 56.00 from holding Canadian Utilities Limited or generate 2.52% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Canadian Utilities Limited vs. Aedas Homes SA
Performance |
Timeline |
Canadian Utilities |
Aedas Homes SA |
Canadian Utilities and Aedas Homes Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Canadian Utilities and Aedas Homes
The main advantage of trading using opposite Canadian Utilities and Aedas Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canadian Utilities 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.Canadian Utilities vs. UNIVMUSIC GRPADR050 | Canadian Utilities vs. NEWELL RUBBERMAID | Canadian Utilities vs. PARKEN Sport Entertainment | Canadian Utilities vs. Vulcan Materials |
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Check out your portfolio center.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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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