Correlation Between Endesa SA and Guangdong Investment
Can any of the company-specific risk be diversified away by investing in both Endesa SA and Guangdong Investment 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 Guangdong Investment 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 Guangdong Investment, you can compare the effects of market volatilities on Endesa SA and Guangdong Investment 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 Guangdong Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Endesa SA and Guangdong Investment.
Diversification Opportunities for Endesa SA and Guangdong Investment
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Endesa and Guangdong is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Endesa SA ADR and Guangdong Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Investment 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 Guangdong Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangdong Investment has no effect on the direction of Endesa SA i.e., Endesa SA and Guangdong Investment go up and down completely randomly.
Pair Corralation between Endesa SA and Guangdong Investment
Assuming the 90 days horizon Endesa SA ADR is expected to generate 0.39 times more return on investment than Guangdong Investment. However, Endesa SA ADR is 2.56 times less risky than Guangdong Investment. It trades about 0.04 of its potential returns per unit of risk. Guangdong Investment is currently generating about -0.01 per unit of risk. If you would invest 858.00 in Endesa SA ADR on August 27, 2024 and sell it today you would earn a total of 212.00 from holding Endesa SA ADR or generate 24.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 93.85% |
| Values | Daily Returns |
Endesa SA ADR vs. Guangdong Investment
Performance |
| Timeline |
| Endesa SA ADR |
| Guangdong Investment |
Endesa SA and Guangdong Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Endesa SA and Guangdong Investment
The main advantage of trading using opposite Endesa SA and Guangdong Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Endesa SA position performs unexpectedly, Guangdong Investment 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 Guangdong Investment will offset losses from the drop in Guangdong Investment's long position.| Endesa SA vs. NVIDIA | Endesa SA vs. Blacksky Technology | Endesa SA vs. Crowdstrike Holdings | Endesa SA vs. Cintas |
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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 Transaction History module to view history of all your transactions and understand their impact on performance.
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