Correlation Between Endesa SA and Repsol
Can any of the company-specific risk be diversified away by investing in both Endesa SA and Repsol 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 Repsol into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Endesa SA and Repsol, you can compare the effects of market volatilities on Endesa SA and Repsol 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 Repsol. Check out your portfolio center. Please also check ongoing floating volatility patterns of Endesa SA and Repsol.
Diversification Opportunities for Endesa SA and Repsol
Modest diversification
The 3 months correlation between Endesa and Repsol is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Endesa SA and Repsol in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Repsol 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 Repsol. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Repsol has no effect on the direction of Endesa SA i.e., Endesa SA and Repsol go up and down completely randomly.
Pair Corralation between Endesa SA and Repsol
Assuming the 90 days trading horizon Endesa SA is expected to generate 0.74 times more return on investment than Repsol. However, Endesa SA is 1.34 times less risky than Repsol. It trades about 0.19 of its potential returns per unit of risk. Repsol is currently generating about -0.01 per unit of risk. If you would invest 2,074 in Endesa SA on November 2, 2024 and sell it today you would earn a total of 68.00 from holding Endesa SA or generate 3.28% 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. Repsol
Performance |
| Timeline |
| Endesa SA |
| Repsol |
Endesa SA and Repsol Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Endesa SA and Repsol
The main advantage of trading using opposite Endesa SA and Repsol positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Endesa SA position performs unexpectedly, Repsol 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 Repsol will offset losses from the drop in Repsol's long position.The idea behind Endesa SA and Repsol 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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