Correlation Between Iberdrola and PacifiCorp
Can any of the company-specific risk be diversified away by investing in both Iberdrola and PacifiCorp 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 PacifiCorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Iberdrola SA and PacifiCorp, you can compare the effects of market volatilities on Iberdrola and PacifiCorp 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 PacifiCorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Iberdrola and PacifiCorp.
Diversification Opportunities for Iberdrola and PacifiCorp
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Iberdrola and PacifiCorp is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Iberdrola SA and PacifiCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PacifiCorp 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 PacifiCorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PacifiCorp has no effect on the direction of Iberdrola i.e., Iberdrola and PacifiCorp go up and down completely randomly.
Pair Corralation between Iberdrola and PacifiCorp
Assuming the 90 days horizon Iberdrola SA is expected to under-perform the PacifiCorp. But the pink sheet apears to be less risky and, when comparing its historical volatility, Iberdrola SA is 1.96 times less risky than PacifiCorp. The pink sheet trades about -0.14 of its potential returns per unit of risk. The PacifiCorp is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 12,601 in PacifiCorp on September 1, 2024 and sell it today you would earn a total of 1,399 from holding PacifiCorp or generate 11.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Iberdrola SA vs. PacifiCorp
Performance |
| Timeline |
| Iberdrola SA |
| PacifiCorp |
Iberdrola and PacifiCorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Iberdrola and PacifiCorp
The main advantage of trading using opposite Iberdrola and PacifiCorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Iberdrola position performs unexpectedly, PacifiCorp 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 PacifiCorp will offset losses from the drop in PacifiCorp's long position.| Iberdrola vs. Aurora Innovation | Iberdrola vs. Empire State Realty | Iberdrola vs. Scottie Resources Corp | Iberdrola vs. FactSet Research Systems |
| PacifiCorp vs. SBM Offshore NV | PacifiCorp vs. BW Offshore Limited | PacifiCorp vs. KNOT Offshore Partners | PacifiCorp vs. NioCorp Developments Ltd |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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