Correlation Between IBEX 35 and Adolfo Dominguez

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Can any of the company-specific risk be diversified away by investing in both IBEX 35 and Adolfo Dominguez 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 IBEX 35 and Adolfo Dominguez into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IBEX 35 Index and Adolfo Dominguez SA, you can compare the effects of market volatilities on IBEX 35 and Adolfo Dominguez 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 IBEX 35 with a short position of Adolfo Dominguez. Check out your portfolio center. Please also check ongoing floating volatility patterns of IBEX 35 and Adolfo Dominguez.

Diversification Opportunities for IBEX 35 and Adolfo Dominguez

IBEXAdolfoDiversified AwayIBEXAdolfoDiversified Away100%
0.34
  Correlation Coefficient

Weak diversification

The 3 months correlation between IBEX and Adolfo is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding IBEX 35 Index and Adolfo Dominguez SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adolfo Dominguez and IBEX 35 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 IBEX 35 Index are associated (or correlated) with Adolfo Dominguez. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adolfo Dominguez has no effect on the direction of IBEX 35 i.e., IBEX 35 and Adolfo Dominguez go up and down completely randomly.
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Pair Corralation between IBEX 35 and Adolfo Dominguez

Assuming the 90 days trading horizon IBEX 35 Index is expected to generate 0.55 times more return on investment than Adolfo Dominguez. However, IBEX 35 Index is 1.83 times less risky than Adolfo Dominguez. It trades about 0.49 of its potential returns per unit of risk. Adolfo Dominguez SA is currently generating about 0.12 per unit of risk. If you would invest  1,199,710  in IBEX 35 Index on November 27, 2024 and sell it today you would earn a total of  111,970  from holding IBEX 35 Index or generate 9.33% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

IBEX 35 Index  vs.  Adolfo Dominguez SA

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -50510
JavaScript chart by amCharts 3.21.15IBEX ADZ
       Timeline  

IBEX 35 and Adolfo Dominguez Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-2.33-1.74-1.15-0.560.0110.661.311.952.63.25 0.10.20.30.40.50.6
JavaScript chart by amCharts 3.21.15IBEX ADZ
       Returns  

Pair Trading with IBEX 35 and Adolfo Dominguez

The main advantage of trading using opposite IBEX 35 and Adolfo Dominguez positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IBEX 35 position performs unexpectedly, Adolfo Dominguez 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 Adolfo Dominguez will offset losses from the drop in Adolfo Dominguez's long position.
The idea behind IBEX 35 Index and Adolfo Dominguez SA 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.
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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.

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