Correlation Between Iberdrola and National Grid
Can any of the company-specific risk be diversified away by investing in both Iberdrola and National Grid 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 National Grid into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Iberdrola SA and National Grid plc, you can compare the effects of market volatilities on Iberdrola and National Grid 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 National Grid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Iberdrola and National Grid.
Diversification Opportunities for Iberdrola and National Grid
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Iberdrola and National is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Iberdrola SA and National Grid plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Grid plc 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 National Grid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Grid plc has no effect on the direction of Iberdrola i.e., Iberdrola and National Grid go up and down completely randomly.
Pair Corralation between Iberdrola and National Grid
Assuming the 90 days trading horizon Iberdrola SA is expected to generate 0.61 times more return on investment than National Grid. However, Iberdrola SA is 1.65 times less risky than National Grid. It trades about 0.06 of its potential returns per unit of risk. National Grid plc is currently generating about 0.03 per unit of risk. If you would invest 1,003 in Iberdrola SA on September 4, 2024 and sell it today you would earn a total of 347.00 from holding Iberdrola SA or generate 34.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Iberdrola SA vs. National Grid plc
Performance |
| Timeline |
| Iberdrola SA |
| National Grid plc |
Iberdrola and National Grid Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Iberdrola and National Grid
The main advantage of trading using opposite Iberdrola and National Grid positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Iberdrola position performs unexpectedly, National Grid 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 National Grid will offset losses from the drop in National Grid's long position.| Iberdrola vs. Fidelity National Information | Iberdrola vs. Brockhaus Capital Management | Iberdrola vs. Pure Storage | Iberdrola vs. DOCDATA |
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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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