Correlation Between Indra A and Sacyr SA
Can any of the company-specific risk be diversified away by investing in both Indra A and Sacyr SA 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 Sacyr SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Indra A and Sacyr SA, you can compare the effects of market volatilities on Indra A and Sacyr SA 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 Sacyr SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indra A and Sacyr SA.
Diversification Opportunities for Indra A and Sacyr SA
Very weak diversification
The 3 months correlation between Indra and Sacyr is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Indra A and Sacyr SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sacyr SA 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 Sacyr SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sacyr SA has no effect on the direction of Indra A i.e., Indra A and Sacyr SA go up and down completely randomly.
Pair Corralation between Indra A and Sacyr SA
Assuming the 90 days trading horizon Indra A is expected to generate 0.7 times more return on investment than Sacyr SA. However, Indra A is 1.43 times less risky than Sacyr SA. It trades about -0.06 of its potential returns per unit of risk. Sacyr SA is currently generating about -0.08 per unit of risk. If you would invest 1,679 in Indra A on August 28, 2024 and sell it today you would lose (24.00) from holding Indra A or give up 1.43% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Indra A vs. Sacyr SA
Performance |
| Timeline |
| Indra A |
| Sacyr SA |
Indra A and Sacyr SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Indra A and Sacyr SA
The main advantage of trading using opposite Indra A and Sacyr SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Indra A position performs unexpectedly, Sacyr SA 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 Sacyr SA will offset losses from the drop in Sacyr SA's long position.The idea behind Indra A and Sacyr 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.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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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