Correlation Between National Grid and Endesa SA
Can any of the company-specific risk be diversified away by investing in both National Grid 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 National Grid and Endesa SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between National Grid PLC and Endesa SA, you can compare the effects of market volatilities on National Grid 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 National Grid with a short position of Endesa SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Grid and Endesa SA.
Diversification Opportunities for National Grid and Endesa SA
-0.75 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between National and Endesa is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding National Grid PLC and Endesa SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Endesa SA and National Grid 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 National Grid PLC 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 has no effect on the direction of National Grid i.e., National Grid and Endesa SA go up and down completely randomly.
Pair Corralation between National Grid and Endesa SA
Considering the 90-day investment horizon National Grid PLC is expected to under-perform the Endesa SA. In addition to that, National Grid is 3.05 times more volatile than Endesa SA. It trades about -0.07 of its total potential returns per unit of risk. Endesa SA is currently generating about -0.21 per unit of volatility. If you would invest 2,120 in Endesa SA on August 30, 2024 and sell it today you would lose (35.00) from holding Endesa SA or give up 1.65% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
National Grid PLC vs. Endesa SA
Performance |
| Timeline |
| National Grid PLC |
| Endesa SA |
National Grid and Endesa SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Grid and Endesa SA
The main advantage of trading using opposite National Grid and Endesa SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Grid 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.| National Grid vs. Southern Company | National Grid vs. Edison International | National Grid vs. American Electric Power | National Grid vs. Duke Energy |
| Endesa SA vs. Centrais Eltricas Brasileiras | Endesa SA vs. Centrais Electricas Brasileiras | Endesa SA vs. Enel Chile SA | Endesa SA vs. Korea Electric Power |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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