Correlation Between ENDESA ADR and Terna Rete
Can any of the company-specific risk be diversified away by investing in both ENDESA ADR and Terna Rete 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 ADR and Terna Rete into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ENDESA ADR 12 and Terna Rete, you can compare the effects of market volatilities on ENDESA ADR and Terna Rete 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 ADR with a short position of Terna Rete. Check out your portfolio center. Please also check ongoing floating volatility patterns of ENDESA ADR and Terna Rete.
Diversification Opportunities for ENDESA ADR and Terna Rete
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between ENDESA and Terna is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding ENDESA ADR 12 and Terna Rete in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Terna Rete and ENDESA ADR 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 ADR 12 are associated (or correlated) with Terna Rete. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Terna Rete has no effect on the direction of ENDESA ADR i.e., ENDESA ADR and Terna Rete go up and down completely randomly.
Pair Corralation between ENDESA ADR and Terna Rete
Assuming the 90 days trading horizon ENDESA ADR 12 is expected to generate 1.33 times more return on investment than Terna Rete. However, ENDESA ADR is 1.33 times more volatile than Terna Rete. It trades about 0.25 of its potential returns per unit of risk. Terna Rete is currently generating about 0.1 per unit of risk. If you would invest 925.00 in ENDESA ADR 12 on September 13, 2024 and sell it today you would earn a total of 60.00 from holding ENDESA ADR 12 or generate 6.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
ENDESA ADR 12 vs. Terna Rete
Performance |
| Timeline |
| ENDESA ADR 12 |
| Terna Rete |
ENDESA ADR and Terna Rete Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ENDESA ADR and Terna Rete
The main advantage of trading using opposite ENDESA ADR and Terna Rete positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ENDESA ADR position performs unexpectedly, Terna Rete 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 Terna Rete will offset losses from the drop in Terna Rete's long position.| ENDESA ADR vs. Duke Energy | ENDESA ADR vs. WEC Energy Group | ENDESA ADR vs. CMS Energy | ENDESA ADR vs. Terna Rete |
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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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