Correlation Between Industria and Repsol

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

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

Diversification Opportunities for Industria and Repsol

0.15

Correlation Coefficient

Industria  Repsol

Average diversification

The 3 months correlation between Industria and Repsol is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Industria de Diseno and Repsol in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Repsol and Industria 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 Industria de Diseno are associated (or correlated) with Repsol. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Repsol has no effect on the direction of Industria i.e., Industria and Repsol go up and down completely randomly.

Pair Corralation between Industria and Repsol

Assuming the 90 days trading horizon Industria de Diseno is expected to under-perform the Repsol. In addition to that, Industria is 1.08 times more volatile than Repsol. It trades about -0.05 of its total potential returns per unit of risk. Repsol is currently generating about 0.14 per unit of volatility. If you would invest  1,103  in Repsol on December 28, 2024 and sell it today you would earn a total of  149.00  from holding Repsol or generate 13.51% return on investment over 90 days.

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

Industria de Diseno  vs.  Repsol

Industria de Diseno

Risk-Adjusted Performance

Very Weak

Over the last 90 days Industria de Diseno has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Industria is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Repsol

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Repsol are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Repsol exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Industria and Repsol

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

The idea behind Industria de Diseno and Repsol 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.

Check out your portfolio center.

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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.