Correlation Between Pescanova and Aedas Homes

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

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

Diversification Opportunities for Pescanova and Aedas Homes

-0.54

Correlation Coefficient

Pescanova  Aedas Homes

Excellent diversification

The 3 months correlation between Pescanova and Aedas is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Pescanova 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 Pescanova 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 Pescanova 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 Pescanova i.e., Pescanova and Aedas Homes go up and down completely randomly.

Pair Corralation between Pescanova and Aedas Homes

Assuming the 90 days trading horizon Pescanova SA is expected to generate 3.98 times more return on investment than Aedas Homes. However, Pescanova is 3.98 times more volatile than Aedas Homes SL. It trades about 0.03 of its potential returns per unit of risk. Aedas Homes SL is currently generating about 0.01 per unit of risk. If you would invest  35.00  in Pescanova SA on September 4, 2024 and sell it today you would earn a total of  0.00  from holding Pescanova SA or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Pescanova SA  vs.  Aedas Homes SL

Pescanova SA

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pescanova SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Pescanova may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Aedas Homes SL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aedas Homes SL has generated negative risk-adjusted returns adding no value to investors with long positions. 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 Pescanova and Aedas Homes

The main advantage of trading using opposite Pescanova and Aedas Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pescanova 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 Pescanova 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.

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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.