Correlation Between Endesa SA and EDP Energias
Can any of the company-specific risk be diversified away by investing in both Endesa SA and EDP Energias 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 EDP Energias into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Endesa SA ADR and EDP Energias de, you can compare the effects of market volatilities on Endesa SA and EDP Energias 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 EDP Energias. Check out your portfolio center. Please also check ongoing floating volatility patterns of Endesa SA and EDP Energias.
Diversification Opportunities for Endesa SA and EDP Energias
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between Endesa and EDP is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Endesa SA ADR and EDP Energias de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EDP Energias de 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 ADR are associated (or correlated) with EDP Energias. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EDP Energias de has no effect on the direction of Endesa SA i.e., Endesa SA and EDP Energias go up and down completely randomly.
Pair Corralation between Endesa SA and EDP Energias
Assuming the 90 days horizon Endesa SA ADR is expected to generate 1.34 times more return on investment than EDP Energias. However, Endesa SA is 1.34 times more volatile than EDP Energias de. It trades about 0.19 of its potential returns per unit of risk. EDP Energias de is currently generating about -0.21 per unit of risk. If you would invest 1,016 in Endesa SA ADR on September 12, 2024 and sell it today you would earn a total of 83.00 from holding Endesa SA ADR or generate 8.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Endesa SA ADR vs. EDP Energias de
Performance |
| Timeline |
| Endesa SA ADR |
| EDP Energias de |
Endesa SA and EDP Energias Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Endesa SA and EDP Energias
The main advantage of trading using opposite Endesa SA and EDP Energias positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Endesa SA position performs unexpectedly, EDP Energias 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 EDP Energias will offset losses from the drop in EDP Energias' long position.| Endesa SA vs. Equatorial Energia SA | Endesa SA vs. Centrais Electricas Brasileiras | Endesa SA vs. Entergy Texas | Endesa SA vs. IDACORP |
| EDP Energias vs. Atco | EDP Energias vs. Canadian Utilities Limited | EDP Energias vs. Engie SA ADR | EDP Energias vs. The AES |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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