Correlation Between Iberdrola and First National
Can any of the company-specific risk be diversified away by investing in both Iberdrola and First National 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 Iberdrola and First National into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Iberdrola SA and First National Energy, you can compare the effects of market volatilities on Iberdrola and First National 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 Iberdrola with a short position of First National. Check out your portfolio center. Please also check ongoing floating volatility patterns of Iberdrola and First National.
Diversification Opportunities for Iberdrola and First National
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Iberdrola and First is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Iberdrola SA and First National Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First National Energy and Iberdrola 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 Iberdrola SA are associated (or correlated) with First National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First National Energy has no effect on the direction of Iberdrola i.e., Iberdrola and First National go up and down completely randomly.
Pair Corralation between Iberdrola and First National
Assuming the 90 days horizon Iberdrola SA is expected to under-perform the First National. But the pink sheet apears to be less risky and, when comparing its historical volatility, Iberdrola SA is 14.96 times less risky than First National. The pink sheet trades about -0.12 of its potential returns per unit of risk. The First National Energy is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 5.00 in First National Energy on September 12, 2024 and sell it today you would earn a total of 4.06 from holding First National Energy or generate 81.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Iberdrola SA vs. First National Energy
Performance |
| Timeline |
| Iberdrola SA |
| First National Energy |
Iberdrola and First National Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Iberdrola and First National
The main advantage of trading using opposite Iberdrola and First National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Iberdrola position performs unexpectedly, First National 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 First National will offset losses from the drop in First National's long position.| Iberdrola vs. EDP Energias de | Iberdrola vs. ENEL Societa per | Iberdrola vs. Engie SA ADR | Iberdrola vs. RWE AG PK |
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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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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