Correlation Between Caixabank and Acerinox

Can any of the company-specific risk be diversified away by investing in both Caixabank and Acerinox 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 Caixabank and Acerinox into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Caixabank SA and Acerinox, you can compare the effects of market volatilities on Caixabank and Acerinox 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 Caixabank with a short position of Acerinox. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caixabank and Acerinox.

Diversification Opportunities for Caixabank and Acerinox

0.56

Correlation Coefficient

Caixabank  Acerinox

Very weak diversification

The 3 months correlation between Caixabank and Acerinox is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Caixabank SA and Acerinox in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acerinox and Caixabank 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 Caixabank SA are associated (or correlated) with Acerinox. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Acerinox has no effect on the direction of Caixabank i.e., Caixabank and Acerinox go up and down completely randomly.

Pair Corralation between Caixabank and Acerinox

Assuming the 90 days trading horizon Caixabank SA is expected to generate 1.15 times more return on investment than Acerinox. However, Caixabank is 1.15 times more volatile than Acerinox. It trades about 0.32 of its potential returns per unit of risk. Acerinox is currently generating about 0.09 per unit of risk. If you would invest  405.00  in Caixabank SA on March 5, 2024 and sell it today you would earn a total of  122.00  from holding Caixabank SA or generate 30.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Caixabank SA  vs.  Acerinox

Caixabank SA

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Caixabank SA are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Caixabank exhibited solid returns over the last few months and may actually be approaching a breakup point.

Acerinox

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Acerinox are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Acerinox may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Pair Trading with Caixabank and Acerinox

The main advantage of trading using opposite Caixabank and Acerinox positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caixabank position performs unexpectedly, Acerinox 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 Acerinox will offset losses from the drop in Acerinox's long position.

The idea behind Caixabank SA and Acerinox pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.