Correlation Between Endesa SA and Aena SA
Can any of the company-specific risk be diversified away by investing in both Endesa SA and Aena SA 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 Endesa SA and Aena SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Endesa SA and Aena SA, you can compare the effects of market volatilities on Endesa SA and Aena SA 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 Endesa SA with a short position of Aena SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Endesa SA and Aena SA.
Diversification Opportunities for Endesa SA and Aena SA
Weak diversification
The 3 months correlation between Endesa and Aena is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Endesa SA and Aena SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aena SA and Endesa SA 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 Endesa SA are associated (or correlated) with Aena SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aena SA has no effect on the direction of Endesa SA i.e., Endesa SA and Aena SA go up and down completely randomly.
Pair Corralation between Endesa SA and Aena SA
Assuming the 90 days trading horizon Endesa SA is expected to generate 1.95 times less return on investment than Aena SA. But when comparing it to its historical volatility, Endesa SA is 1.06 times less risky than Aena SA. It trades about 0.05 of its potential returns per unit of risk. Aena SA is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 11,293 in Aena SA on September 13, 2024 and sell it today you would earn a total of 8,487 from holding Aena SA or generate 75.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Endesa SA vs. Aena SA
Performance |
| Timeline |
| Endesa SA |
| Aena SA |
Endesa SA and Aena SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Endesa SA and Aena SA
The main advantage of trading using opposite Endesa SA and Aena SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Endesa SA position performs unexpectedly, Aena SA 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 Aena SA will offset losses from the drop in Aena SA's long position.The idea behind Endesa SA and Aena 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.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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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