Correlation Between SSE PLC and EVN AG
Can any of the company-specific risk be diversified away by investing in both SSE PLC and EVN AG 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 EVN AG 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 EVN AG, you can compare the effects of market volatilities on SSE PLC and EVN AG 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 EVN AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of SSE PLC and EVN AG.
Diversification Opportunities for SSE PLC and EVN AG
Very poor diversification
The 3 months correlation between SSE and EVN is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding SSE PLC ADR and EVN AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EVN AG 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 EVN AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EVN AG has no effect on the direction of SSE PLC i.e., SSE PLC and EVN AG go up and down completely randomly.
Pair Corralation between SSE PLC and EVN AG
Assuming the 90 days trading horizon SSE PLC ADR is expected to under-perform the EVN AG. In addition to that, SSE PLC is 1.02 times more volatile than EVN AG. It trades about -0.08 of its total potential returns per unit of risk. EVN AG is currently generating about 0.37 per unit of volatility. If you would invest 2,060 in EVN AG on October 20, 2024 and sell it today you would earn a total of 210.00 from holding EVN AG or generate 10.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
SSE PLC ADR vs. EVN AG
Performance |
| Timeline |
| SSE PLC ADR |
| EVN AG |
SSE PLC and EVN AG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SSE PLC and EVN AG
The main advantage of trading using opposite SSE PLC and EVN AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SSE PLC position performs unexpectedly, EVN AG 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 EVN AG will offset losses from the drop in EVN AG'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 |
| EVN AG vs. ECHO INVESTMENT ZY | EVN AG vs. EAT WELL INVESTMENT | EVN AG vs. SEI INVESTMENTS | EVN AG vs. GALENA MINING LTD |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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