Correlation Between Essential Utilities and Endesa SA
Can any of the company-specific risk be diversified away by investing in both Essential Utilities and Endesa SA 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 Essential Utilities and Endesa SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Essential Utilities and Endesa SA ADR, you can compare the effects of market volatilities on Essential Utilities and Endesa SA 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 Essential Utilities with a short position of Endesa SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Essential Utilities and Endesa SA.
Diversification Opportunities for Essential Utilities and Endesa SA
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Essential and Endesa is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Essential Utilities and Endesa SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Endesa SA ADR and Essential Utilities 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 Essential Utilities are associated (or correlated) with Endesa SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Endesa SA ADR has no effect on the direction of Essential Utilities i.e., Essential Utilities and Endesa SA go up and down completely randomly.
Pair Corralation between Essential Utilities and Endesa SA
Given the investment horizon of 90 days Essential Utilities is expected to generate 0.77 times more return on investment than Endesa SA. However, Essential Utilities is 1.29 times less risky than Endesa SA. It trades about 0.07 of its potential returns per unit of risk. Endesa SA ADR is currently generating about 0.03 per unit of risk. If you would invest 3,884 in Essential Utilities on August 27, 2024 and sell it today you would earn a total of 69.00 from holding Essential Utilities or generate 1.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Essential Utilities vs. Endesa SA ADR
Performance |
| Timeline |
| Essential Utilities |
| Endesa SA ADR |
Essential Utilities and Endesa SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Essential Utilities and Endesa SA
The main advantage of trading using opposite Essential Utilities and Endesa SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Essential Utilities position performs unexpectedly, Endesa SA 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 SA will offset losses from the drop in Endesa SA's long position.| Essential Utilities vs. American States Water | Essential Utilities vs. California Water Service | Essential Utilities vs. Consolidated Water Co | Essential Utilities vs. SJW Group Common |
| Endesa SA vs. NVIDIA | Endesa SA vs. Blacksky Technology | Endesa SA vs. Crowdstrike Holdings | Endesa SA vs. Cintas |
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.
Other Complementary Tools
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
| USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk |