Correlation Between Iberdrola and Energy Of

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

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

Diversification Opportunities for Iberdrola and Energy Of

0.1

Correlation Coefficient

Iberdrola  Energy Of

Average diversification

The 3 months correlation between Iberdrola and Energy is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Iberdrola SA and Energy of Minas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy of Minas and Iberdrola 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 Iberdrola SA are associated (or correlated) with Energy Of. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy of Minas has no effect on the direction of Iberdrola i.e., Iberdrola and Energy Of go up and down completely randomly.

Pair Corralation between Iberdrola and Energy Of

Assuming the 90 days horizon Iberdrola SA is expected to generate 0.7 times more return on investment than Energy Of. However, Iberdrola SA is 1.42 times less risky than Energy Of. It trades about 0.0 of its potential returns per unit of risk. Energy of Minas is currently generating about -0.06 per unit of risk. If you would invest  1,433  in Iberdrola SA on September 4, 2024 and sell it today you would lose (6.00) from holding Iberdrola SA or give up 0.42% of portfolio value over 90 days.

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

Iberdrola SA  vs.  Energy of Minas

Iberdrola SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Iberdrola SA has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Energy of Minas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Energy of Minas has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Iberdrola and Energy Of

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

The idea behind Iberdrola SA and Energy of Minas 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.