Correlation Between Ferrovial and Indra A
Can any of the company-specific risk be diversified away by investing in both Ferrovial and Indra A 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 Indra A into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ferrovial and Indra A, you can compare the effects of market volatilities on Ferrovial and Indra A 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 Indra A. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ferrovial and Indra A.
Diversification Opportunities for Ferrovial and Indra A
Very weak diversification
The 3 months correlation between Ferrovial and Indra is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Ferrovial and Indra A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indra A 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 are associated (or correlated) with Indra A. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indra A has no effect on the direction of Ferrovial i.e., Ferrovial and Indra A go up and down completely randomly.
Pair Corralation between Ferrovial and Indra A
Assuming the 90 days trading horizon Ferrovial is expected to generate 0.93 times more return on investment than Indra A. However, Ferrovial is 1.07 times less risky than Indra A. It trades about 0.11 of its potential returns per unit of risk. Indra A is currently generating about 0.03 per unit of risk. If you would invest 3,687 in Ferrovial on September 12, 2024 and sell it today you would earn a total of 325.00 from holding Ferrovial or generate 8.81% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Ferrovial vs. Indra A
Performance |
Timeline |
Ferrovial |
Indra A |
Ferrovial and Indra A Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Ferrovial and Indra A
The main advantage of trading using opposite Ferrovial and Indra A positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ferrovial position performs unexpectedly, Indra A 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 Indra A will offset losses from the drop in Indra A's long position.The idea behind Ferrovial and Indra A 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.Check out your portfolio center.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.
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