Correlation Between SSE PLC and C PARAN
Can any of the company-specific risk be diversified away by investing in both SSE PLC and C PARAN 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 SSE PLC and C PARAN into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SSE PLC ADR and C PARAN EN, you can compare the effects of market volatilities on SSE PLC and C PARAN 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 SSE PLC with a short position of C PARAN. Check out your portfolio center. Please also check ongoing floating volatility patterns of SSE PLC and C PARAN.
Diversification Opportunities for SSE PLC and C PARAN
Poor diversification
The 3 months correlation between SSE and ELP1 is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding SSE PLC ADR and C PARAN EN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on C PARAN EN and SSE PLC 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 SSE PLC ADR are associated (or correlated) with C PARAN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of C PARAN EN has no effect on the direction of SSE PLC i.e., SSE PLC and C PARAN go up and down completely randomly.
Pair Corralation between SSE PLC and C PARAN
Assuming the 90 days trading horizon SSE PLC ADR is expected to under-perform the C PARAN. In addition to that, SSE PLC is 1.19 times more volatile than C PARAN EN. It trades about -0.08 of its total potential returns per unit of risk. C PARAN EN is currently generating about 0.08 per unit of volatility. If you would invest 545.00 in C PARAN EN on October 20, 2024 and sell it today you would earn a total of 10.00 from holding C PARAN EN or generate 1.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
SSE PLC ADR vs. C PARAN EN
Performance |
| Timeline |
| SSE PLC ADR |
| C PARAN EN |
SSE PLC and C PARAN Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SSE PLC and C PARAN
The main advantage of trading using opposite SSE PLC and C PARAN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SSE PLC position performs unexpectedly, C PARAN 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 C PARAN will offset losses from the drop in C PARAN's long position.| SSE PLC vs. IBERDROLA ADR1 EO | SSE PLC vs. C PARAN EN | SSE PLC vs. CIA ENGER ADR | SSE PLC vs. Companhia Energtica de |
| C PARAN vs. IBERDROLA ADR1 EO | C PARAN vs. SSE PLC ADR | C PARAN vs. CIA ENGER ADR | C PARAN vs. Companhia Energtica 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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