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
-0.81 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Red and Empresa is -0.81. 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 Corporacion is expected to under-perform the Empresa Distribuidora. But the pink sheet apears to be less risky and, when comparing its historical volatility, Red Electrica Corporacion is 2.04 times less risky than Empresa Distribuidora. The pink sheet trades about -0.11 of its potential returns per unit of risk. The Empresa Distribuidora y is currently generating about 0.53 of returns per unit of risk over similar time horizon. If you would invest 2,910 in Empresa Distribuidora y on September 1, 2024 and sell it today you would earn a total of 1,088 from holding Empresa Distribuidora y or generate 37.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| 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. Southern Company | Red Electrica vs. Duke Energy | Red Electrica vs. Duke Energy | Red Electrica vs. National Grid PLC |
| Empresa Distribuidora vs. MGE Energy | Empresa Distribuidora vs. CMS Energy | Empresa Distribuidora vs. OGE Energy | Empresa Distribuidora vs. DTE 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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