Correlation Between Iberdrola and Airbus Group
Can any of the company-specific risk be diversified away by investing in both Iberdrola and Airbus Group 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 Airbus Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Iberdrola SA and Airbus Group SE, you can compare the effects of market volatilities on Iberdrola and Airbus Group 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 Airbus Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Iberdrola and Airbus Group.
Diversification Opportunities for Iberdrola and Airbus Group
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between Iberdrola and Airbus is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Iberdrola SA and Airbus Group SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Airbus Group SE 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 Airbus Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Airbus Group SE has no effect on the direction of Iberdrola i.e., Iberdrola and Airbus Group go up and down completely randomly.
Pair Corralation between Iberdrola and Airbus Group
Assuming the 90 days trading horizon Iberdrola SA is expected to generate 0.7 times more return on investment than Airbus Group. However, Iberdrola SA is 1.42 times less risky than Airbus Group. It trades about 0.06 of its potential returns per unit of risk. Airbus Group SE is currently generating about 0.04 per unit of risk. If you would invest 1,013 in Iberdrola SA on August 28, 2024 and sell it today you would earn a total of 327.00 from holding Iberdrola SA or generate 32.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Iberdrola SA vs. Airbus Group SE
Performance |
| Timeline |
| Iberdrola SA |
| Airbus Group SE |
Iberdrola and Airbus Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Iberdrola and Airbus Group
The main advantage of trading using opposite Iberdrola and Airbus Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Iberdrola position performs unexpectedly, Airbus Group 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 Airbus Group will offset losses from the drop in Airbus Group's long position.The idea behind Iberdrola SA and Airbus Group SE pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Airbus Group vs. Cellnex Telecom SA | Airbus Group vs. NH Hoteles | Airbus Group vs. Melia Hotels | Airbus Group vs. Atrys Health SL |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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