Correlation Between ACS Actividades and Iberdrola

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

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

Diversification Opportunities for ACS Actividades and Iberdrola

0.72

Correlation Coefficient

ACS Actividades  Iberdrola

Poor diversification

The 3 months correlation between ACS and Iberdrola is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding ACS Actividades de and Iberdrola SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iberdrola SA and ACS Actividades 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 ACS Actividades de are associated (or correlated) with Iberdrola. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iberdrola SA has no effect on the direction of ACS Actividades i.e., ACS Actividades and Iberdrola go up and down completely randomly.

Pair Corralation between ACS Actividades and Iberdrola

Assuming the 90 days trading horizon ACS Actividades is expected to generate 1.01 times less return on investment than Iberdrola. In addition to that, ACS Actividades is 1.66 times more volatile than Iberdrola SA. It trades about 0.14 of its total potential returns per unit of risk. Iberdrola SA is currently generating about 0.24 per unit of volatility. If you would invest  1,299  in Iberdrola SA on December 29, 2024 and sell it today you would earn a total of  203.00  from holding Iberdrola SA or generate 15.63% return on investment over 90 days.

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

ACS Actividades de  vs.  Iberdrola SA

ACS Actividades de

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ACS Actividades de are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, ACS Actividades exhibited solid returns over the last few months and may actually be approaching a breakup point.

Iberdrola SA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Iberdrola SA are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Iberdrola exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ACS Actividades and Iberdrola

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

The idea behind ACS Actividades de and Iberdrola 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.