Correlation Between BBVA Accion and Metrovacesa
Can any of the company-specific risk be diversified away by investing in both BBVA Accion and Metrovacesa 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 BBVA Accion and Metrovacesa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BBVA Accion DJ and Metrovacesa SA, you can compare the effects of market volatilities on BBVA Accion and Metrovacesa 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 BBVA Accion with a short position of Metrovacesa. Check out your portfolio center. Please also check ongoing floating volatility patterns of BBVA Accion and Metrovacesa.
Diversification Opportunities for BBVA Accion and Metrovacesa
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between BBVA and Metrovacesa is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding BBVA Accion DJ and Metrovacesa SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metrovacesa SA and BBVA Accion 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 BBVA Accion DJ are associated (or correlated) with Metrovacesa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metrovacesa SA has no effect on the direction of BBVA Accion i.e., BBVA Accion and Metrovacesa go up and down completely randomly.
Pair Corralation between BBVA Accion and Metrovacesa
Assuming the 90 days trading horizon BBVA Accion is expected to generate 2.32 times less return on investment than Metrovacesa. But when comparing it to its historical volatility, BBVA Accion DJ is 1.13 times less risky than Metrovacesa. It trades about 0.34 of its potential returns per unit of risk. Metrovacesa SA is currently generating about 0.71 of returns per unit of risk over similar time horizon. If you would invest 857.00 in Metrovacesa SA on November 28, 2024 and sell it today you would earn a total of 131.00 from holding Metrovacesa SA or generate 15.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
BBVA Accion DJ vs. Metrovacesa SA
Performance |
| Timeline |
| BBVA Accion DJ |
| Metrovacesa SA |
BBVA Accion and Metrovacesa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BBVA Accion and Metrovacesa
The main advantage of trading using opposite BBVA Accion and Metrovacesa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BBVA Accion position performs unexpectedly, Metrovacesa 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 Metrovacesa will offset losses from the drop in Metrovacesa's long position.The idea behind BBVA Accion DJ and Metrovacesa SA 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.| Metrovacesa vs. NH Hoteles | Metrovacesa vs. Fomento de Construcciones | Metrovacesa vs. Inmobiliaria Colonial SA | Metrovacesa vs. Aedas Homes SL |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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