Correlation Between Anhui Conch and Endesa SA

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

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

Diversification Opportunities for Anhui Conch and Endesa SA

0.77

Correlation Coefficient

Anhui Conch  Endesa SA

Poor diversification

The 3 months correlation between Anhui and Endesa is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Anhui Conch Cement and Endesa SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Endesa SA ADR and Anhui Conch 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 Anhui Conch Cement 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 ADR has no effect on the direction of Anhui Conch i.e., Anhui Conch and Endesa SA go up and down completely randomly.

Pair Corralation between Anhui Conch and Endesa SA

Assuming the 90 days horizon Anhui Conch is expected to generate 1.5 times less return on investment than Endesa SA. In addition to that, Anhui Conch is 1.5 times more volatile than Endesa SA ADR. It trades about 0.1 of its total potential returns per unit of risk. Endesa SA ADR is currently generating about 0.23 per unit of volatility. If you would invest  1,066  in Endesa SA ADR on December 29, 2024 and sell it today you would earn a total of  244.00  from holding Endesa SA ADR or generate 22.89% return on investment over 90 days.

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

Anhui Conch Cement  vs.  Endesa SA ADR

Anhui Conch Cement

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Anhui Conch Cement are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical indicators, Anhui Conch showed solid returns over the last few months and may actually be approaching a breakup point.

Endesa SA ADR

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Endesa SA ADR are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Endesa SA showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Anhui Conch and Endesa SA

The main advantage of trading using opposite Anhui Conch and Endesa SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Anhui Conch 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 Anhui Conch Cement and Endesa SA ADR 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .