Correlation Between Repsol and Airbus Group

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

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

Diversification Opportunities for Repsol and Airbus Group

-0.16

Correlation Coefficient

Repsol  Airbus Group

Good diversification

The 3 months correlation between Repsol and Airbus is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Repsol and Airbus Group SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Airbus Group SE and Repsol 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 Repsol are associated (or correlated) with Airbus Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Airbus Group SE has no effect on the direction of Repsol i.e., Repsol and Airbus Group go up and down completely randomly.

Pair Corralation between Repsol and Airbus Group

Assuming the 90 days trading horizon Repsol is expected to under-perform the Airbus Group. But the stock apears to be less risky and, when comparing its historical volatility, Repsol is 1.04 times less risky than Airbus Group. The stock trades about -0.01 of its potential returns per unit of risk. The Airbus Group SE is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  11,334  in Airbus Group SE on October 23, 2024 and sell it today you would earn a total of  5,002  from holding Airbus Group SE or generate 44.13% return on investment over 90 days.

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

Repsol  vs.  Airbus Group SE

Repsol

Risk-Adjusted Performance

1 of 100

Weak

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

Airbus Group SE

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Airbus Group SE are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Airbus Group exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Repsol and Airbus Group

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

The idea behind Repsol and Airbus Group SE 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.