Correlation Between IBERDROLA ADR/1 and Neinor Homes

Can any of the company-specific risk be diversified away by investing in both IBERDROLA ADR/1 and Neinor Homes 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 ADR/1 and Neinor Homes into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between IBERDROLA ADR1 EO and Neinor Homes SA, you can compare the effects of market volatilities on IBERDROLA ADR/1 and Neinor Homes 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 ADR/1 with a short position of Neinor Homes. Check out your portfolio center. Please also check ongoing floating volatility patterns of IBERDROLA ADR/1 and Neinor Homes.

Diversification Opportunities for IBERDROLA ADR/1 and Neinor Homes

-0.45

Correlation Coefficient

IBERDROLA ADR/1  Neinor Homes

Very good diversification

The 3 months correlation between IBERDROLA and Neinor is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding IBERDROLA ADR1 EO and Neinor Homes SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Neinor Homes SA and IBERDROLA ADR/1 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 ADR1 EO are associated (or correlated) with Neinor Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Neinor Homes SA has no effect on the direction of IBERDROLA ADR/1 i.e., IBERDROLA ADR/1 and Neinor Homes go up and down completely randomly.

Pair Corralation between IBERDROLA ADR/1 and Neinor Homes

Assuming the 90 days trading horizon IBERDROLA ADR/1 is expected to generate 146.62 times less return on investment than Neinor Homes. But when comparing it to its historical volatility, IBERDROLA ADR1 EO is 1.49 times less risky than Neinor Homes. It trades about 0.0 of its potential returns per unit of risk. Neinor Homes SA is currently generating about 0.49 of returns per unit of risk over similar time horizon. If you would invest  1,474  in Neinor Homes SA on October 5, 2024 and sell it today you would earn a total of  204.00  from holding Neinor Homes SA or generate 13.84% return on investment over 90 days.

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

IBERDROLA ADR1 EO  vs.  Neinor Homes SA

IBERDROLA ADR1 EO

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IBERDROLA ADR1 EO has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, IBERDROLA ADR/1 is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Neinor Homes SA

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Neinor Homes SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively uncertain basic indicators, Neinor Homes unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IBERDROLA ADR/1 and Neinor Homes

The main advantage of trading using opposite IBERDROLA ADR/1 and Neinor Homes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IBERDROLA ADR/1 position performs unexpectedly, Neinor Homes 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 Neinor Homes will offset losses from the drop in Neinor Homes' long position.

The idea behind IBERDROLA ADR1 EO and Neinor Homes SA 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.