Correlation Between Enel SpA and Iberdrola
Can any of the company-specific risk be diversified away by investing in both Enel SpA and Iberdrola 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 Enel SpA and Iberdrola into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Enel SpA and Iberdrola SA, you can compare the effects of market volatilities on Enel SpA and Iberdrola 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 Enel SpA with a short position of Iberdrola. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enel SpA and Iberdrola.
Diversification Opportunities for Enel SpA and Iberdrola
Poor diversification
The 3 months correlation between Enel and Iberdrola is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Enel SpA and Iberdrola SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iberdrola SA and Enel SpA 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 Enel SpA are associated (or correlated) with Iberdrola. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iberdrola SA has no effect on the direction of Enel SpA i.e., Enel SpA and Iberdrola go up and down completely randomly.
Pair Corralation between Enel SpA and Iberdrola
Assuming the 90 days horizon Enel SpA is expected to under-perform the Iberdrola. But the stock apears to be less risky and, when comparing its historical volatility, Enel SpA is 1.4 times less risky than Iberdrola. The stock trades about -0.04 of its potential returns per unit of risk. The Iberdrola SA is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 1,339 in Iberdrola SA on September 4, 2024 and sell it today you would earn a total of 11.00 from holding Iberdrola SA or generate 0.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Enel SpA vs. Iberdrola SA
Performance |
| Timeline |
| Enel SpA |
| Iberdrola SA |
Enel SpA and Iberdrola Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Enel SpA and Iberdrola
The main advantage of trading using opposite Enel SpA and Iberdrola positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enel SpA position performs unexpectedly, Iberdrola 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 Iberdrola will offset losses from the drop in Iberdrola's long position.| Enel SpA vs. Iberdrola SA | Enel SpA vs. Dominion Energy | Enel SpA vs. Sempra | Enel SpA vs. National Grid plc |
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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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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