Correlation Between Canadian Utilities and Iberdrola
Can any of the company-specific risk be diversified away by investing in both Canadian Utilities and Iberdrola 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 Iberdrola 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 Iberdrola SA, you can compare the effects of market volatilities on Canadian Utilities and Iberdrola 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 Iberdrola. Check out your portfolio center. Please also check ongoing floating volatility patterns of Canadian Utilities and Iberdrola.
Diversification Opportunities for Canadian Utilities and Iberdrola
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Canadian and Iberdrola is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Canadian Utilities Limited and Iberdrola SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iberdrola 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 Iberdrola. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iberdrola SA has no effect on the direction of Canadian Utilities i.e., Canadian Utilities and Iberdrola go up and down completely randomly.
Pair Corralation between Canadian Utilities and Iberdrola
Assuming the 90 days horizon Canadian Utilities Limited is expected to generate 1.04 times more return on investment than Iberdrola. However, Canadian Utilities is 1.04 times more volatile than Iberdrola SA. It trades about -0.06 of its potential returns per unit of risk. Iberdrola SA is currently generating about -0.17 per unit of risk. If you would invest 2,621 in Canadian Utilities Limited on August 29, 2024 and sell it today you would lose (94.00) from holding Canadian Utilities Limited or give up 3.59% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Canadian Utilities Limited vs. Iberdrola SA
Performance |
| Timeline |
| Canadian Utilities |
| Iberdrola SA |
Canadian Utilities and Iberdrola Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Canadian Utilities and Iberdrola
The main advantage of trading using opposite Canadian Utilities and Iberdrola positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Canadian Utilities position performs unexpectedly, Iberdrola 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 Iberdrola will offset losses from the drop in Iberdrola's long position.| Canadian Utilities vs. AuraSource | Canadian Utilities vs. Energy of Minas | Canadian Utilities vs. Allete Inc | Canadian Utilities vs. Avista |
| Iberdrola vs. Companhia Paranaense de | Iberdrola vs. Otter Tail | Iberdrola vs. Brookfield Infrastructure Partners | Iberdrola vs. RWE AG PK |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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