Correlation Between WEC Energy and ENDESA ADR
Can any of the company-specific risk be diversified away by investing in both WEC Energy and ENDESA ADR 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 WEC Energy and ENDESA ADR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WEC Energy Group and ENDESA ADR 12, you can compare the effects of market volatilities on WEC Energy and ENDESA ADR 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 WEC Energy with a short position of ENDESA ADR. Check out your portfolio center. Please also check ongoing floating volatility patterns of WEC Energy and ENDESA ADR.
Diversification Opportunities for WEC Energy and ENDESA ADR
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between WEC and ENDESA is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding WEC Energy Group and ENDESA ADR 12 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ENDESA ADR 12 and WEC Energy 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 WEC Energy Group are associated (or correlated) with ENDESA ADR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ENDESA ADR 12 has no effect on the direction of WEC Energy i.e., WEC Energy and ENDESA ADR go up and down completely randomly.
Pair Corralation between WEC Energy and ENDESA ADR
Assuming the 90 days horizon WEC Energy Group is expected to generate 0.97 times more return on investment than ENDESA ADR. However, WEC Energy Group is 1.03 times less risky than ENDESA ADR. It trades about 0.09 of its potential returns per unit of risk. ENDESA ADR 12 is currently generating about 0.08 per unit of risk. If you would invest 8,524 in WEC Energy Group on September 12, 2024 and sell it today you would earn a total of 616.00 from holding WEC Energy Group or generate 7.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
WEC Energy Group vs. ENDESA ADR 12
Performance |
| Timeline |
| WEC Energy Group |
| ENDESA ADR 12 |
WEC Energy and ENDESA ADR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WEC Energy and ENDESA ADR
The main advantage of trading using opposite WEC Energy and ENDESA ADR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WEC Energy position performs unexpectedly, ENDESA ADR 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 ENDESA ADR will offset losses from the drop in ENDESA ADR's long position.| WEC Energy vs. Nippon Steel | WEC Energy vs. ALGOMA STEEL GROUP | WEC Energy vs. ITALIAN WINE BRANDS | WEC Energy vs. RELIANCE STEEL AL |
| ENDESA ADR vs. Aluminum of | ENDESA ADR vs. ARDAGH METAL PACDL 0001 | ENDESA ADR vs. Eidesvik Offshore ASA | ENDESA ADR vs. Zijin Mining Group |
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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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