Correlation Between Ferrovial and Construcciones

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

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

Diversification Opportunities for Ferrovial and Construcciones

0.15

Correlation Coefficient

Ferrovial  Construcciones

Average diversification

The 3 months correlation between Ferrovial and Construcciones is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Ferrovial SA and Construcciones y Auxiliar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Construcciones y Auxiliar and Ferrovial 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 Ferrovial SA are associated (or correlated) with Construcciones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Construcciones y Auxiliar has no effect on the direction of Ferrovial i.e., Ferrovial and Construcciones go up and down completely randomly.

Pair Corralation between Ferrovial and Construcciones

Assuming the 90 days trading horizon Ferrovial is expected to generate 7.67 times less return on investment than Construcciones. But when comparing it to its historical volatility, Ferrovial SA is 1.06 times less risky than Construcciones. It trades about 0.03 of its potential returns per unit of risk. Construcciones y Auxiliar is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  3,430  in Construcciones y Auxiliar on December 25, 2024 and sell it today you would earn a total of  620.00  from holding Construcciones y Auxiliar or generate 18.08% return on investment over 90 days.

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

Ferrovial SA  vs.  Construcciones y Auxiliar

Ferrovial SA

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ferrovial SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Ferrovial is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Construcciones y Auxiliar

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Construcciones y Auxiliar are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Construcciones exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ferrovial and Construcciones

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

The idea behind Ferrovial SA and Construcciones y Auxiliar 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.