Correlation Between Repsol and Berkeley Energia
Can any of the company-specific risk be diversified away by investing in both Repsol and Berkeley Energia 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 Repsol and Berkeley Energia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Repsol and Berkeley Energia Limited, you can compare the effects of market volatilities on Repsol and Berkeley Energia 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 Repsol with a short position of Berkeley Energia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Repsol and Berkeley Energia.
Diversification Opportunities for Repsol and Berkeley Energia
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Repsol and Berkeley is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Repsol and Berkeley Energia Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Berkeley Energia and Repsol 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 Repsol are associated (or correlated) with Berkeley Energia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Berkeley Energia has no effect on the direction of Repsol i.e., Repsol and Berkeley Energia go up and down completely randomly.
Pair Corralation between Repsol and Berkeley Energia
Assuming the 90 days trading horizon Repsol is expected to generate 0.72 times more return on investment than Berkeley Energia. However, Repsol is 1.38 times less risky than Berkeley Energia. It trades about 0.42 of its potential returns per unit of risk. Berkeley Energia Limited is currently generating about 0.01 per unit of risk. If you would invest 1,059 in Repsol on October 20, 2024 and sell it today you would earn a total of 104.00 from holding Repsol or generate 9.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Repsol vs. Berkeley Energia Limited
Performance |
| Timeline |
| Repsol |
| Berkeley Energia |
Repsol and Berkeley Energia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Repsol and Berkeley Energia
The main advantage of trading using opposite Repsol and Berkeley Energia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Repsol position performs unexpectedly, Berkeley Energia 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 Berkeley Energia will offset losses from the drop in Berkeley Energia's long position.The idea behind Repsol and Berkeley Energia Limited pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Berkeley Energia vs. Vale SA | Berkeley Energia vs. Lingotes | Berkeley Energia vs. Banco de Sabadell | Berkeley Energia vs. Viscofan |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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