Correlation Between Endesa SA and Avangrid

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

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

Diversification Opportunities for Endesa SA and Avangrid

0.0

Correlation Coefficient

Endesa SA  Avangrid

Pay attention - limited upside

The 3 months correlation between Endesa and Avangrid is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Endesa SA ADR and Avangrid in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avangrid and Endesa 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 Endesa SA ADR are associated (or correlated) with Avangrid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avangrid has no effect on the direction of Endesa SA i.e., Endesa SA and Avangrid go up and down completely randomly.

Pair Corralation between Endesa SA and Avangrid

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	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Endesa SA ADR  vs.  Avangrid

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.

Avangrid

Risk-Adjusted Performance

Very Weak

Over the last 90 days Avangrid has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, Avangrid is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Endesa SA and Avangrid

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

The idea behind Endesa SA ADR and Avangrid 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.