Correlation Between FactSet Research and Iberdrola

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

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

Diversification Opportunities for FactSet Research and Iberdrola

-0.43

Correlation Coefficient

FactSet Research  Iberdrola

Very good diversification

The 3 months correlation between FactSet and Iberdrola is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding FactSet Research Systems and Iberdrola SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iberdrola SA and FactSet Research 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 FactSet Research Systems 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 FactSet Research i.e., FactSet Research and Iberdrola go up and down completely randomly.

Pair Corralation between FactSet Research and Iberdrola

Considering the 90-day investment horizon FactSet Research Systems is expected to under-perform the Iberdrola. But the stock apears to be less risky and, when comparing its historical volatility, FactSet Research Systems is 1.3 times less risky than Iberdrola. The stock trades about -0.11 of its potential returns per unit of risk. The Iberdrola SA is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,436  in Iberdrola SA on December 1, 2024 and sell it today you would earn a total of  18.00  from holding Iberdrola SA or generate 1.25% return on investment over 90 days.

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

FactSet Research Systems  vs.  Iberdrola SA

FactSet Research Systems

Risk-Adjusted Performance

Very Weak

Over the last 90 days FactSet Research Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, FactSet Research is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Iberdrola SA

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Iberdrola SA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic 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 FactSet Research and Iberdrola

The main advantage of trading using opposite FactSet Research and Iberdrola positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FactSet Research 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 FactSet Research Systems 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.

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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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.