Correlation Between Indra A and Ferrovial

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

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

Diversification Opportunities for Indra A and Ferrovial

0.22

Correlation Coefficient

Indra A  Ferrovial

Modest diversification

The 3 months correlation between Indra and Ferrovial is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Indra A and Ferrovial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ferrovial and Indra A 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 Indra A are associated (or correlated) with Ferrovial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ferrovial has no effect on the direction of Indra A i.e., Indra A and Ferrovial go up and down completely randomly.

Pair Corralation between Indra A and Ferrovial

Assuming the 90 days trading horizon Indra A is expected to generate 6.43 times less return on investment than Ferrovial. In addition to that, Indra A is 1.12 times more volatile than Ferrovial. It trades about 0.01 of its total potential returns per unit of risk. Ferrovial is currently generating about 0.1 per unit of volatility. If you would invest  3,697  in Ferrovial on September 4, 2024 and sell it today you would earn a total of  269.00  from holding Ferrovial or generate 7.28% return on investment over 90 days.

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

Indra A  vs.  Ferrovial

Indra A

Risk-Adjusted Performance

1 of 100

Weak

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

Ferrovial

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ferrovial are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Ferrovial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Indra A and Ferrovial

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

The idea behind Indra A and Ferrovial 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.