Correlation Between EDreams Odigeo and Home Capital

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

By analyzing existing cross correlation between eDreams Odigeo SA and Home Capital Rentals, you can compare the effects of market volatilities on EDreams Odigeo and Home Capital 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 EDreams Odigeo with a short position of Home Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of EDreams Odigeo and Home Capital.

Diversification Opportunities for EDreams Odigeo and Home Capital

0.63

Correlation Coefficient

EDreams Odigeo  Home Capital

Poor diversification

The 3 months correlation between EDreams and Home is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding eDreams Odigeo SA and Home Capital Rentals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Capital Rentals and EDreams Odigeo 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 eDreams Odigeo SA are associated (or correlated) with Home Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home Capital Rentals has no effect on the direction of EDreams Odigeo i.e., EDreams Odigeo and Home Capital go up and down completely randomly.

Pair Corralation between EDreams Odigeo and Home Capital

Assuming the 90 days trading horizon eDreams Odigeo SA is expected to generate 21.55 times more return on investment than Home Capital. However, EDreams Odigeo is 21.55 times more volatile than Home Capital Rentals. It trades about 0.12 of its potential returns per unit of risk. Home Capital Rentals is currently generating about 0.12 per unit of risk. If you would invest  719.00  in eDreams Odigeo SA on April 22, 2025 and sell it today you would earn a total of  114.00  from holding eDreams Odigeo SA or generate 15.86% return on investment over 90 days.

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

eDreams Odigeo SA  vs.  Home Capital Rentals

eDreams Odigeo SA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in eDreams Odigeo SA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, EDreams Odigeo exhibited solid returns over the last few months and may actually be approaching a breakup point.

Home Capital Rentals

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Home Capital Rentals are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Home Capital is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with EDreams Odigeo and Home Capital

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

The idea behind eDreams Odigeo SA and Home Capital Rentals 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.