Correlation Between Iberdrola and SSE PLC
Can any of the company-specific risk be diversified away by investing in both Iberdrola and SSE PLC 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 SSE PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Iberdrola SA and SSE PLC ADR, you can compare the effects of market volatilities on Iberdrola and SSE PLC 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 SSE PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Iberdrola and SSE PLC.
Diversification Opportunities for Iberdrola and SSE PLC
Very poor diversification
The 3 months correlation between Iberdrola and SSE is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Iberdrola SA and SSE PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SSE PLC ADR 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 SSE PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SSE PLC ADR has no effect on the direction of Iberdrola i.e., Iberdrola and SSE PLC go up and down completely randomly.
Pair Corralation between Iberdrola and SSE PLC
Assuming the 90 days horizon Iberdrola SA is expected to generate 1.08 times more return on investment than SSE PLC. However, Iberdrola is 1.08 times more volatile than SSE PLC ADR. It trades about -0.08 of its potential returns per unit of risk. SSE PLC ADR is currently generating about -0.19 per unit of risk. If you would invest 1,428 in Iberdrola SA on September 12, 2024 and sell it today you would lose (33.00) from holding Iberdrola SA or give up 2.31% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Iberdrola SA vs. SSE PLC ADR
Performance |
| Timeline |
| Iberdrola SA |
| SSE PLC ADR |
Iberdrola and SSE PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Iberdrola and SSE PLC
The main advantage of trading using opposite Iberdrola and SSE PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Iberdrola position performs unexpectedly, SSE PLC 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 SSE PLC will offset losses from the drop in SSE PLC's long position.| Iberdrola vs. EDP Energias de | Iberdrola vs. ENEL Societa per | Iberdrola vs. Engie SA ADR | Iberdrola vs. RWE AG PK |
| SSE PLC vs. ENEL Societa per | SSE PLC vs. Allete Inc | SSE PLC vs. Companhia Energetica de | SSE PLC vs. The AES |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
Other Complementary Tools
| Equity Valuation Check real value of public entities based on technical and fundamental data | |
| Earnings Calls Check upcoming earnings announcements updated hourly across public exchanges | |
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing | |
| Bonds Directory Find actively traded corporate debentures issued by US companies |