Correlation Between Caixabank and Repsol

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

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

Diversification Opportunities for Caixabank and Repsol

0.68

Correlation Coefficient

Caixabank  Repsol

Poor diversification

The 3 months correlation between Caixabank and Repsol is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Caixabank SA and Repsol in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Repsol and Caixabank 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 Caixabank SA are associated (or correlated) with Repsol. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Repsol has no effect on the direction of Caixabank i.e., Caixabank and Repsol go up and down completely randomly.

Pair Corralation between Caixabank and Repsol

Assuming the 90 days trading horizon Caixabank SA is expected to generate 1.13 times more return on investment than Repsol. However, Caixabank is 1.13 times more volatile than Repsol. It trades about 0.31 of its potential returns per unit of risk. Repsol is currently generating about 0.13 per unit of risk. If you would invest  521.00  in Caixabank SA on December 29, 2024 and sell it today you would earn a total of  205.00  from holding Caixabank SA or generate 39.35% return on investment over 90 days.

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

Caixabank SA  vs.  Repsol

Caixabank SA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Caixabank SA are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Caixabank exhibited solid returns over the last few months and may actually be approaching a breakup point.

Repsol

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Repsol are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Repsol exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Caixabank and Repsol

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

The idea behind Caixabank SA and Repsol 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.