Correlation Between Covestro and Acciona SA

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

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

Diversification Opportunities for Covestro and Acciona SA

0.63

Correlation Coefficient

Covestro  Acciona SA

Poor diversification

The 3 months correlation between Covestro and Acciona is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Covestro AG and Acciona SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acciona SA and Covestro 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 Covestro AG are associated (or correlated) with Acciona SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Acciona SA has no effect on the direction of Covestro i.e., Covestro and Acciona SA go up and down completely randomly.

Pair Corralation between Covestro and Acciona SA

Assuming the 90 days horizon Covestro AG is expected to generate 0.22 times more return on investment than Acciona SA. However, Covestro AG is 4.49 times less risky than Acciona SA. It trades about -0.12 of its potential returns per unit of risk. Acciona SA is currently generating about -0.1 per unit of risk. If you would invest  6,365  in Covestro AG on October 27, 2024 and sell it today you would lose (266.00) from holding Covestro AG or give up 4.18% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	93.75%
Values	Daily Returns

Covestro AG  vs.  Acciona SA

Covestro AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Covestro AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Covestro is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Acciona SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Acciona SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's forward indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Covestro and Acciona SA

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

The idea behind Covestro AG and Acciona 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.