Correlation Between VIRG NATL and Endesa SA

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

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

Diversification Opportunities for VIRG NATL and Endesa SA

0.57

Correlation Coefficient

VIRG NATL  Endesa SA

Very weak diversification

The 3 months correlation between VIRG and Endesa is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding VIRG NATL BANKSH and Endesa SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Endesa SA and VIRG NATL 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 VIRG NATL BANKSH 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 has no effect on the direction of VIRG NATL i.e., VIRG NATL and Endesa SA go up and down completely randomly.

Pair Corralation between VIRG NATL and Endesa SA

Assuming the 90 days horizon VIRG NATL BANKSH is expected to generate 2.54 times more return on investment than Endesa SA. However, VIRG NATL is 2.54 times more volatile than Endesa SA. It trades about 0.07 of its potential returns per unit of risk. Endesa SA is currently generating about 0.05 per unit of risk. If you would invest  3,610  in VIRG NATL BANKSH on September 17, 2024 and sell it today you would earn a total of  370.00  from holding VIRG NATL BANKSH or generate 10.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

VIRG NATL BANKSH  vs.  Endesa SA

VIRG NATL BANKSH

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in VIRG NATL BANKSH are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, VIRG NATL may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Endesa SA

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Endesa SA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Endesa SA is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with VIRG NATL and Endesa SA

The main advantage of trading using opposite VIRG NATL and Endesa SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VIRG NATL 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.

The idea behind VIRG NATL BANKSH and Endesa SA 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.