Correlation Between Red Electrica and Empresa Distribuidora
Can any of the company-specific risk be diversified away by investing in both Red Electrica and Empresa Distribuidora 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 Red Electrica and Empresa Distribuidora into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Red Electrica Corporacion and Empresa Distribuidora y, you can compare the effects of market volatilities on Red Electrica and Empresa Distribuidora 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 Red Electrica with a short position of Empresa Distribuidora. Check out your portfolio center. Please also check ongoing floating volatility patterns of Red Electrica and Empresa Distribuidora.
Diversification Opportunities for Red Electrica and Empresa Distribuidora
-0.19 | Correlation Coefficient |
Good diversification
The 3 months correlation between Red and Empresa is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Red Electrica Corporacion and Empresa Distribuidora y in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Empresa Distribuidora and Red Electrica 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 Red Electrica Corporacion are associated (or correlated) with Empresa Distribuidora. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Empresa Distribuidora has no effect on the direction of Red Electrica i.e., Red Electrica and Empresa Distribuidora go up and down completely randomly.
Pair Corralation between Red Electrica and Empresa Distribuidora
Assuming the 90 days horizon Red Electrica is expected to generate 23.44 times less return on investment than Empresa Distribuidora. But when comparing it to its historical volatility, Red Electrica Corporacion is 3.44 times less risky than Empresa Distribuidora. It trades about 0.01 of its potential returns per unit of risk. Empresa Distribuidora y is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 865.00 in Empresa Distribuidora y on October 25, 2024 and sell it today you would earn a total of 2,747 from holding Empresa Distribuidora y or generate 317.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Red Electrica Corporacion vs. Empresa Distribuidora y
Performance |
| Timeline |
| Red Electrica Corporacion |
| Empresa Distribuidora |
Red Electrica and Empresa Distribuidora Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Red Electrica and Empresa Distribuidora
The main advantage of trading using opposite Red Electrica and Empresa Distribuidora positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Red Electrica position performs unexpectedly, Empresa Distribuidora 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 Empresa Distribuidora will offset losses from the drop in Empresa Distribuidora's long position.| Red Electrica vs. Engie Brasil Energia | Red Electrica vs. Centrais Eltricas Brasileiras | Red Electrica vs. Centrais Electricas Brasileiras | Red Electrica vs. Ameren Corp |
| Empresa Distribuidora vs. Centrais Electricas Brasileiras | Empresa Distribuidora vs. Enel Chile SA | Empresa Distribuidora vs. Korea Electric Power | Empresa Distribuidora vs. Genie Energy |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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