Correlation Between Iberdrola and Banco De

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

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

Diversification Opportunities for Iberdrola and Banco De

0.26

Correlation Coefficient

Iberdrola  Banco De

Modest diversification

The 3 months correlation between Iberdrola and Banco is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Iberdrola SA and Banco de Sabadell in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco de Sabadell 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 Banco De. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco de Sabadell has no effect on the direction of Iberdrola i.e., Iberdrola and Banco De go up and down completely randomly.

Pair Corralation between Iberdrola and Banco De

Assuming the 90 days trading horizon Iberdrola SA is expected to under-perform the Banco De. But the stock apears to be less risky and, when comparing its historical volatility, Iberdrola SA is 1.79 times less risky than Banco De. The stock trades about -0.02 of its potential returns per unit of risk. The Banco de Sabadell is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  182.00  in Banco de Sabadell on September 13, 2024 and sell it today you would earn a total of  6.00  from holding Banco de Sabadell or generate 3.3% return on investment over 90 days.

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

Iberdrola SA  vs.  Banco de Sabadell

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.

Banco de Sabadell

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Banco de Sabadell are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental drivers, Banco De 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 Banco De

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

The idea behind Iberdrola SA and Banco de Sabadell 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.