Correlation Between Korea Electric and Endesa SA
Can any of the company-specific risk be diversified away by investing in both Korea Electric and Endesa 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 Korea Electric and Endesa SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Korea Electric Power and Endesa SA ADR, you can compare the effects of market volatilities on Korea Electric and Endesa 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 Korea Electric with a short position of Endesa SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Korea Electric and Endesa SA.
Diversification Opportunities for Korea Electric and Endesa SA
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between Korea and Endesa is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Korea Electric Power and Endesa SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Endesa SA ADR and Korea Electric 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 Korea Electric Power are associated (or correlated) with Endesa SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Endesa SA ADR has no effect on the direction of Korea Electric i.e., Korea Electric and Endesa SA go up and down completely randomly.
Pair Corralation between Korea Electric and Endesa SA
Considering the 90-day investment horizon Korea Electric Power is expected to generate 1.37 times more return on investment than Endesa SA. However, Korea Electric is 1.37 times more volatile than Endesa SA ADR. It trades about 0.14 of its potential returns per unit of risk. Endesa SA ADR is currently generating about 0.14 per unit of risk. If you would invest 701.00 in Korea Electric Power on October 26, 2024 and sell it today you would earn a total of 33.00 from holding Korea Electric Power or generate 4.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 94.74% |
| Values | Daily Returns |
Korea Electric Power vs. Endesa SA ADR
Performance |
| Timeline |
| Korea Electric Power |
| Endesa SA ADR |
Korea Electric and Endesa SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Korea Electric and Endesa SA
The main advantage of trading using opposite Korea Electric and Endesa SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Korea Electric position performs unexpectedly, Endesa 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 Endesa SA will offset losses from the drop in Endesa SA's long position.| Korea Electric vs. Enel Chile SA | Korea Electric vs. Centrais Eltricas Brasileiras | Korea Electric vs. Central Puerto SA | Korea Electric vs. CMS Energy |
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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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