Correlation Between Iberdrola and Mapfre

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

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

Diversification Opportunities for Iberdrola and Mapfre

0.78

Correlation Coefficient

Iberdrola  Mapfre

Poor diversification

The 3 months correlation between Iberdrola and Mapfre is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Iberdrola SA and Mapfre in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mapfre 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 Mapfre. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mapfre has no effect on the direction of Iberdrola i.e., Iberdrola and Mapfre go up and down completely randomly.

Pair Corralation between Iberdrola and Mapfre

Assuming the 90 days trading horizon Iberdrola is expected to generate 1.11 times less return on investment than Mapfre. But when comparing it to its historical volatility, Iberdrola SA is 1.41 times less risky than Mapfre. It trades about 0.23 of its potential returns per unit of risk. Mapfre is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  244.00  in Mapfre on December 30, 2024 and sell it today you would earn a total of  42.00  from holding Mapfre or generate 17.21% return on investment over 90 days.

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

Iberdrola SA  vs.  Mapfre

Iberdrola SA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Iberdrola SA are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Iberdrola exhibited solid returns over the last few months and may actually be approaching a breakup point.

Mapfre

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mapfre are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Mapfre exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Iberdrola and Mapfre

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

The idea behind Iberdrola SA and Mapfre 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.