Correlation Between Iberdrola and Energy Solar

Can any of the company-specific risk be diversified away by investing in both Iberdrola and Energy Solar 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 Solar 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 Solar Tech, you can compare the effects of market volatilities on Iberdrola and Energy Solar 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 Solar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Iberdrola and Energy Solar.

Diversification Opportunities for Iberdrola and Energy Solar

-0.54

Correlation Coefficient

Iberdrola  Energy Solar

Excellent diversification

The 3 months correlation between Iberdrola and Energy is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Iberdrola SA and Energy Solar Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy Solar Tech 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 Solar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy Solar Tech has no effect on the direction of Iberdrola i.e., Iberdrola and Energy Solar go up and down completely randomly.

Pair Corralation between Iberdrola and Energy Solar

Assuming the 90 days trading horizon Iberdrola SA is expected to under-perform the Energy Solar. But the stock apears to be less risky and, when comparing its historical volatility, Iberdrola SA is 1.61 times less risky than Energy Solar. The stock trades about -0.02 of its potential returns per unit of risk. The Energy Solar Tech is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  304.00  in Energy Solar Tech on September 13, 2024 and sell it today you would earn a total of  2.00  from holding Energy Solar Tech or generate 0.66% return on investment over 90 days.

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

Iberdrola SA  vs.  Energy Solar Tech

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. In spite of rather sound technical and fundamental indicators, Iberdrola is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Energy Solar Tech

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Energy Solar Tech are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Energy Solar is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Iberdrola and Energy Solar

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

The idea behind Iberdrola SA and Energy Solar Tech 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.