Correlation Between Repsol and Industria
Can any of the company-specific risk be diversified away by investing in both Repsol and Industria 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 Industria into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Repsol and Industria de Diseno, you can compare the effects of market volatilities on Repsol and Industria 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 Industria. Check out your portfolio center. Please also check ongoing floating volatility patterns of Repsol and Industria.
Diversification Opportunities for Repsol and Industria
Very good diversification
The 3 months correlation between Repsol and Industria is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Repsol and Industria de Diseno in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Industria de Diseno 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 Industria. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Industria de Diseno has no effect on the direction of Repsol i.e., Repsol and Industria go up and down completely randomly.
Pair Corralation between Repsol and Industria
Assuming the 90 days trading horizon Repsol is expected to generate 1.43 times less return on investment than Industria. In addition to that, Repsol is 1.18 times more volatile than Industria de Diseno. It trades about 0.03 of its total potential returns per unit of risk. Industria de Diseno is currently generating about 0.05 per unit of volatility. If you would invest 5,189 in Industria de Diseno on August 26, 2024 and sell it today you would earn a total of 107.00 from holding Industria de Diseno or generate 2.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Repsol vs. Industria de Diseno
Performance |
| Timeline |
| Repsol |
| Industria de Diseno |
Repsol and Industria Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Repsol and Industria
The main advantage of trading using opposite Repsol and Industria positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Repsol position performs unexpectedly, Industria 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 Industria will offset losses from the drop in Industria's long position.The idea behind Repsol and Industria de Diseno 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.| Industria vs. Iberdrola SA | Industria vs. Repsol | Industria vs. Banco Santander | Industria vs. ACS Actividades de |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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