Correlation Between Iberdrola and General De

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Can any of the company-specific risk be diversified away by investing in both Iberdrola and General De 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 Iberdrola and General De into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Iberdrola SA and General De Alquiler, you can compare the effects of market volatilities on Iberdrola and General De 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 Iberdrola with a short position of General De. Check out your portfolio center. Please also check ongoing floating volatility patterns of Iberdrola and General De.

Diversification Opportunities for Iberdrola and General De

-0.6
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Iberdrola and General is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Iberdrola SA and General De Alquiler in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General De Alquiler and Iberdrola 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 Iberdrola SA are associated (or correlated) with General De. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General De Alquiler has no effect on the direction of Iberdrola i.e., Iberdrola and General De go up and down completely randomly.

Pair Corralation between Iberdrola and General De

Assuming the 90 days trading horizon Iberdrola SA is expected to generate 0.47 times more return on investment than General De. However, Iberdrola SA is 2.12 times less risky than General De. It trades about 0.03 of its potential returns per unit of risk. General De Alquiler is currently generating about 0.01 per unit of risk. If you would invest  984.00  in Iberdrola SA on December 30, 2023 and sell it today you would earn a total of  166.00  from holding Iberdrola SA or generate 16.87% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy99.6%
ValuesDaily Returns

Iberdrola SA  vs.  General De Alquiler

 Performance 
       Timeline  
Iberdrola SA 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Iberdrola SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Iberdrola is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.
General De Alquiler 

Risk-Adjusted Performance

4 of 100

 
Low
 
High
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in General De Alquiler are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady primary indicators, General De may actually be approaching a critical reversion point that can send shares even higher in April 2024.

Iberdrola and General De Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Iberdrola and General De

The main advantage of trading using opposite Iberdrola and General De positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Iberdrola position performs unexpectedly, General De 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 General De will offset losses from the drop in General De's long position.
The idea behind Iberdrola SA and General De Alquiler 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.
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..

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