Correlation Between Indra A and Acerinox
Can any of the company-specific risk be diversified away by investing in both Indra A and Acerinox 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 Indra A and Acerinox into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Indra A and Acerinox, you can compare the effects of market volatilities on Indra A and Acerinox 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 Indra A with a short position of Acerinox. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indra A and Acerinox.
Diversification Opportunities for Indra A and Acerinox
Poor diversification
The 3 months correlation between Indra and Acerinox is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Indra A and Acerinox in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acerinox and Indra A 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 Indra A are associated (or correlated) with Acerinox. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Acerinox has no effect on the direction of Indra A i.e., Indra A and Acerinox go up and down completely randomly.
Pair Corralation between Indra A and Acerinox
Assuming the 90 days trading horizon Indra A is expected to generate 0.96 times more return on investment than Acerinox. However, Indra A is 1.04 times less risky than Acerinox. It trades about 0.28 of its potential returns per unit of risk. Acerinox is currently generating about 0.19 per unit of risk. If you would invest 1,708 in Indra A on November 1, 2024 and sell it today you would earn a total of 140.00 from holding Indra A or generate 8.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Indra A vs. Acerinox
Performance |
| Timeline |
| Indra A |
| Acerinox |
Indra A and Acerinox Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Indra A and Acerinox
The main advantage of trading using opposite Indra A and Acerinox positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Indra A position performs unexpectedly, Acerinox 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 Acerinox will offset losses from the drop in Acerinox's long position.The idea behind Indra A and Acerinox 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.| Acerinox vs. ACS Actividades de | Acerinox vs. ArcelorMittal SA | Acerinox vs. Mapfre | Acerinox vs. Ferrovial SA |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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