Correlation Between EDP Renovveis and Orsted AS
Can any of the company-specific risk be diversified away by investing in both EDP Renovveis and Orsted AS 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 EDP Renovveis and Orsted AS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EDP Renovveis SA and Orsted AS, you can compare the effects of market volatilities on EDP Renovveis and Orsted AS 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 EDP Renovveis with a short position of Orsted AS. Check out your portfolio center. Please also check ongoing floating volatility patterns of EDP Renovveis and Orsted AS.
Diversification Opportunities for EDP Renovveis and Orsted AS
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between EDP and Orsted is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding EDP Renovveis SA and Orsted AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orsted AS and EDP Renovveis 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 EDP Renovveis SA are associated (or correlated) with Orsted AS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orsted AS has no effect on the direction of EDP Renovveis i.e., EDP Renovveis and Orsted AS go up and down completely randomly.
Pair Corralation between EDP Renovveis and Orsted AS
Assuming the 90 days horizon EDP Renovveis SA is expected to generate 0.82 times more return on investment than Orsted AS. However, EDP Renovveis SA is 1.22 times less risky than Orsted AS. It trades about -0.46 of its potential returns per unit of risk. Orsted AS is currently generating about -0.41 per unit of risk. If you would invest 1,105 in EDP Renovveis SA on September 24, 2024 and sell it today you would lose (151.00) from holding EDP Renovveis SA or give up 13.67% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
EDP Renovveis SA vs. Orsted AS
Performance |
| Timeline |
| EDP Renovveis SA |
| Orsted AS |
EDP Renovveis and Orsted AS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EDP Renovveis and Orsted AS
The main advantage of trading using opposite EDP Renovveis and Orsted AS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EDP Renovveis position performs unexpectedly, Orsted AS 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 Orsted AS will offset losses from the drop in Orsted AS's long position.| EDP Renovveis vs. Orsted AS | EDP Renovveis vs. CGN Power Co | EDP Renovveis vs. Huaneng Power International | EDP Renovveis vs. Power Assets Holdings |
| Orsted AS vs. EDP Renovveis SA | Orsted AS vs. CGN Power Co | Orsted AS vs. Huaneng Power International | Orsted AS vs. Power Assets Holdings |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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