Correlation Between Elecnor SA and Berkeley Energia

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

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

Diversification Opportunities for Elecnor SA and Berkeley Energia

0.38

Correlation Coefficient

Elecnor SA  Berkeley Energia

Weak diversification

The 3 months correlation between Elecnor and Berkeley is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Elecnor SA and Berkeley Energia Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Berkeley Energia and Elecnor 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 Elecnor SA are associated (or correlated) with Berkeley Energia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Berkeley Energia has no effect on the direction of Elecnor SA i.e., Elecnor SA and Berkeley Energia go up and down completely randomly.

Pair Corralation between Elecnor SA and Berkeley Energia

Assuming the 90 days trading horizon Elecnor SA is expected to generate 0.45 times more return on investment than Berkeley Energia. However, Elecnor SA is 2.21 times less risky than Berkeley Energia. It trades about 0.13 of its potential returns per unit of risk. Berkeley Energia Limited is currently generating about 0.01 per unit of risk. If you would invest  1,842  in Elecnor SA on September 13, 2024 and sell it today you would earn a total of  178.00  from holding Elecnor SA or generate 9.66% return on investment over 90 days.

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

Elecnor SA  vs.  Berkeley Energia Limited

Elecnor SA

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Elecnor SA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Elecnor SA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Berkeley Energia

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Berkeley Energia Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Berkeley Energia is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Elecnor SA and Berkeley Energia

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

The idea behind Elecnor SA and Berkeley Energia Limited 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.