Correlation Between Acciona SA and Arcadis NV

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

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

Diversification Opportunities for Acciona SA and Arcadis NV

-0.25

Correlation Coefficient

Acciona SA  Arcadis NV

Very good diversification

The 3 months correlation between Acciona and Arcadis is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Acciona SA and Arcadis NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arcadis NV and Acciona 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 Acciona SA are associated (or correlated) with Arcadis NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arcadis NV has no effect on the direction of Acciona SA i.e., Acciona SA and Arcadis NV go up and down completely randomly.

Pair Corralation between Acciona SA and Arcadis NV

Assuming the 90 days horizon Acciona SA is expected to generate 1.24 times more return on investment than Arcadis NV. However, Acciona SA is 1.24 times more volatile than Arcadis NV. It trades about 0.12 of its potential returns per unit of risk. Arcadis NV is currently generating about -0.08 per unit of risk. If you would invest  10,865  in Acciona SA on December 30, 2024 and sell it today you would earn a total of  1,875  from holding Acciona SA or generate 17.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.31%
Values	Daily Returns

Acciona SA  vs.  Arcadis NV

Acciona SA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Acciona SA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal forward indicators, Acciona SA reported solid returns over the last few months and may actually be approaching a breakup point.

Arcadis NV

Risk-Adjusted Performance

Very Weak

Over the last 90 days Arcadis NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Acciona SA and Arcadis NV

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

The idea behind Acciona SA and Arcadis NV 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.