Correlation Between Endesa SA and Southern
Can any of the company-specific risk be diversified away by investing in both Endesa SA and Southern 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 Endesa SA and Southern into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Endesa SA and Southern Company, you can compare the effects of market volatilities on Endesa SA and Southern 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 Endesa SA with a short position of Southern. Check out your portfolio center. Please also check ongoing floating volatility patterns of Endesa SA and Southern.
Diversification Opportunities for Endesa SA and Southern
Very good diversification
The 3 months correlation between Endesa and Southern is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Endesa SA and Southern Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern and Endesa SA 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 Endesa SA are associated (or correlated) with Southern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern has no effect on the direction of Endesa SA i.e., Endesa SA and Southern go up and down completely randomly.
Pair Corralation between Endesa SA and Southern
Assuming the 90 days horizon Endesa SA is expected to under-perform the Southern. But the pink sheet apears to be less risky and, when comparing its historical volatility, Endesa SA is 1.18 times less risky than Southern. The pink sheet trades about -0.02 of its potential returns per unit of risk. The Southern Company is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 6,927 in Southern Company on January 26, 2024 and sell it today you would earn a total of 464.00 from holding Southern Company or generate 6.7% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Endesa SA vs. Southern Company
Performance |
Timeline |
Endesa SA |
Southern |
Endesa SA and Southern Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Endesa SA and Southern
The main advantage of trading using opposite Endesa SA and Southern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Endesa SA position performs unexpectedly, Southern 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 Southern will offset losses from the drop in Southern's long position.Endesa SA vs. Southern Company | Endesa SA vs. Duke Energy | Endesa SA vs. Duke Energy | Endesa SA vs. National Grid PLC |
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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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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