Correlation Between Mapfre and Endesa SA

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

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

Diversification Opportunities for Mapfre and Endesa SA

0.85

Correlation Coefficient

Mapfre  Endesa SA

Very poor diversification

The 3 months correlation between Mapfre and Endesa is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Mapfre and Endesa SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Endesa SA and Mapfre 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 Mapfre are associated (or correlated) with Endesa SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Endesa SA has no effect on the direction of Mapfre i.e., Mapfre and Endesa SA go up and down completely randomly.

Pair Corralation between Mapfre and Endesa SA

Assuming the 90 days trading horizon Mapfre is expected to generate 1.21 times less return on investment than Endesa SA. In addition to that, Mapfre is 1.35 times more volatile than Endesa SA. It trades about 0.19 of its total potential returns per unit of risk. Endesa SA is currently generating about 0.3 per unit of volatility. If you would invest  2,024  in Endesa SA on December 30, 2024 and sell it today you would earn a total of  440.00  from holding Endesa SA or generate 21.74% return on investment over 90 days.

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

Mapfre  vs.  Endesa SA

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.

Endesa SA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Endesa SA are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Endesa SA exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mapfre and Endesa SA

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

The idea behind Mapfre and Endesa 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 Stocks Directory module to find actively traded stocks across global markets.