Correlation Between Entergy Texas and Endesa SA

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

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

Diversification Opportunities for Entergy Texas and Endesa SA

0.04

Correlation Coefficient

Entergy Texas  Endesa SA

Significant diversification

The 3 months correlation between Entergy and Endesa is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Entergy Texas and Endesa SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Endesa SA ADR and Entergy Texas 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 Entergy Texas are associated (or correlated) with Endesa SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Endesa SA ADR has no effect on the direction of Entergy Texas i.e., Entergy Texas and Endesa SA go up and down completely randomly.

Pair Corralation between Entergy Texas and Endesa SA

Assuming the 90 days horizon Entergy Texas is expected to generate 0.51 times more return on investment than Endesa SA. However, Entergy Texas is 1.97 times less risky than Endesa SA. It trades about 0.11 of its potential returns per unit of risk. Endesa SA ADR is currently generating about 0.03 per unit of risk. If you would invest  2,358  in Entergy Texas on September 2, 2024 and sell it today you would earn a total of  125.00  from holding Entergy Texas or generate 5.3% return on investment over 90 days.

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

Entergy Texas  vs.  Endesa SA ADR

Entergy Texas

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Entergy Texas are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Entergy Texas is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Endesa SA ADR

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Endesa SA ADR are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Endesa SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Entergy Texas and Endesa SA

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

The idea behind Entergy Texas and Endesa SA ADR 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.