Correlation Between SSE PLC and IBERDROLA ADR1
Can any of the company-specific risk be diversified away by investing in both SSE PLC and IBERDROLA ADR1 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 IBERDROLA ADR1 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 IBERDROLA ADR1 EO, you can compare the effects of market volatilities on SSE PLC and IBERDROLA ADR1 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 IBERDROLA ADR1. Check out your portfolio center. Please also check ongoing floating volatility patterns of SSE PLC and IBERDROLA ADR1.
Diversification Opportunities for SSE PLC and IBERDROLA ADR1
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between SSE and IBERDROLA is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding SSE PLC ADR and IBERDROLA ADR1 EO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IBERDROLA ADR1 EO 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 IBERDROLA ADR1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IBERDROLA ADR1 EO has no effect on the direction of SSE PLC i.e., SSE PLC and IBERDROLA ADR1 go up and down completely randomly.
Pair Corralation between SSE PLC and IBERDROLA ADR1
Assuming the 90 days trading horizon SSE PLC ADR is expected to under-perform the IBERDROLA ADR1. In addition to that, SSE PLC is 1.01 times more volatile than IBERDROLA ADR1 EO. It trades about -0.03 of its total potential returns per unit of risk. IBERDROLA ADR1 EO is currently generating about -0.03 per unit of volatility. If you would invest 5,300 in IBERDROLA ADR1 EO on September 12, 2024 and sell it today you would lose (50.00) from holding IBERDROLA ADR1 EO or give up 0.94% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SSE PLC ADR vs. IBERDROLA ADR1 EO
Performance |
| Timeline |
| SSE PLC ADR |
| IBERDROLA ADR1 EO |
SSE PLC and IBERDROLA ADR1 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SSE PLC and IBERDROLA ADR1
The main advantage of trading using opposite SSE PLC and IBERDROLA ADR1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SSE PLC position performs unexpectedly, IBERDROLA ADR1 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 IBERDROLA ADR1 will offset losses from the drop in IBERDROLA ADR1's long position.| SSE PLC vs. Luckin Coffee | SSE PLC vs. AEON STORES | SSE PLC vs. VARIOUS EATERIES LS | SSE PLC vs. China BlueChemical |
| IBERDROLA ADR1 vs. Infrastrutture Wireless Italiane | IBERDROLA ADR1 vs. Thai Beverage Public | IBERDROLA ADR1 vs. COFCO Joycome Foods | IBERDROLA ADR1 vs. Corporate Office Properties |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
Other Complementary Tools
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| Cryptocurrency Center Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency | |
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
| Global Correlations Find global opportunities by holding instruments from different markets |