Correlation Between Otter Tail and Iberdrola
Can any of the company-specific risk be diversified away by investing in both Otter Tail and Iberdrola 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 Otter Tail and Iberdrola into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Otter Tail and Iberdrola SA, you can compare the effects of market volatilities on Otter Tail and Iberdrola 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 Otter Tail with a short position of Iberdrola. Check out your portfolio center. Please also check ongoing floating volatility patterns of Otter Tail and Iberdrola.
Diversification Opportunities for Otter Tail and Iberdrola
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Otter and Iberdrola is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Otter Tail and Iberdrola SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iberdrola SA and Otter Tail 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 Otter Tail are associated (or correlated) with Iberdrola. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iberdrola SA has no effect on the direction of Otter Tail i.e., Otter Tail and Iberdrola go up and down completely randomly.
Pair Corralation between Otter Tail and Iberdrola
Given the investment horizon of 90 days Otter Tail is expected to generate 1.49 times more return on investment than Iberdrola. However, Otter Tail is 1.49 times more volatile than Iberdrola SA. It trades about 0.08 of its potential returns per unit of risk. Iberdrola SA is currently generating about -0.11 per unit of risk. If you would invest 7,806 in Otter Tail on September 1, 2024 and sell it today you would earn a total of 258.00 from holding Otter Tail or generate 3.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Otter Tail vs. Iberdrola SA
Performance |
| Timeline |
| Otter Tail |
| Iberdrola SA |
Otter Tail and Iberdrola Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Otter Tail and Iberdrola
The main advantage of trading using opposite Otter Tail and Iberdrola positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Otter Tail position performs unexpectedly, Iberdrola 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 Iberdrola will offset losses from the drop in Iberdrola's long position.| Otter Tail vs. The AES | Otter Tail vs. Avista | Otter Tail vs. Brookfield Infrastructure Partners | Otter Tail vs. Companhia Energetica de |
| Iberdrola vs. Companhia Paranaense de | Iberdrola vs. Otter Tail | Iberdrola vs. Brookfield Infrastructure Partners | Iberdrola vs. RWE AG PK |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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