Correlation Between De Grey and Iberdrola

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

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

Diversification Opportunities for De Grey and Iberdrola

-0.29

Correlation Coefficient

De Grey  Iberdrola

Very good diversification

The 3 months correlation between DGD and Iberdrola is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding De Grey Mining and Iberdrola SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iberdrola SA and De Grey 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 De Grey Mining 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 De Grey i.e., De Grey and Iberdrola go up and down completely randomly.

Pair Corralation between De Grey and Iberdrola

Assuming the 90 days trading horizon De Grey Mining is expected to generate 2.94 times more return on investment than Iberdrola. However, De Grey is 2.94 times more volatile than Iberdrola SA. It trades about 0.03 of its potential returns per unit of risk. Iberdrola SA is currently generating about 0.06 per unit of risk. If you would invest  95.00  in De Grey Mining on October 24, 2024 and sell it today you would earn a total of  24.00  from holding De Grey Mining or generate 25.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

De Grey Mining  vs.  Iberdrola SA

De Grey Mining

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in De Grey Mining are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, De Grey unveiled solid returns over the last few months and may actually be approaching a breakup point.

Iberdrola SA

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with De Grey and Iberdrola

The main advantage of trading using opposite De Grey and Iberdrola positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if De Grey 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 De Grey Mining 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..