Correlation Between GMO Internet and ENDESA ADR
Can any of the company-specific risk be diversified away by investing in both GMO Internet and ENDESA ADR 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 GMO Internet and ENDESA ADR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GMO Internet and ENDESA ADR 12, you can compare the effects of market volatilities on GMO Internet and ENDESA ADR 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 GMO Internet with a short position of ENDESA ADR. Check out your portfolio center. Please also check ongoing floating volatility patterns of GMO Internet and ENDESA ADR.
Diversification Opportunities for GMO Internet and ENDESA ADR
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between GMO and ENDESA is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding GMO Internet and ENDESA ADR 12 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ENDESA ADR 12 and GMO Internet 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 GMO Internet are associated (or correlated) with ENDESA ADR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ENDESA ADR 12 has no effect on the direction of GMO Internet i.e., GMO Internet and ENDESA ADR go up and down completely randomly.
Pair Corralation between GMO Internet and ENDESA ADR
Assuming the 90 days horizon GMO Internet is expected to generate 8.14 times less return on investment than ENDESA ADR. But when comparing it to its historical volatility, GMO Internet is 1.25 times less risky than ENDESA ADR. It trades about 0.04 of its potential returns per unit of risk. ENDESA ADR 12 is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 940.00 in ENDESA ADR 12 on October 25, 2024 and sell it today you would earn a total of 60.00 from holding ENDESA ADR 12 or generate 6.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 94.44% |
| Values | Daily Returns |
GMO Internet vs. ENDESA ADR 12
Performance |
| Timeline |
| GMO Internet |
| ENDESA ADR 12 |
GMO Internet and ENDESA ADR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GMO Internet and ENDESA ADR
The main advantage of trading using opposite GMO Internet and ENDESA ADR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GMO Internet position performs unexpectedly, ENDESA ADR 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 ENDESA ADR will offset losses from the drop in ENDESA ADR's long position.| GMO Internet vs. T Mobile | GMO Internet vs. China Mobile Limited | GMO Internet vs. Verizon Communications | GMO Internet vs. ATT Inc |
| ENDESA ADR vs. GAZTRTECHNIUADR15EO01 | ENDESA ADR vs. ANGLO ASIAN MINING | ENDESA ADR vs. Agilent Technologies | ENDESA ADR vs. Minerals Technologies |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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