Correlation Between Repsol and Energy Solar

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

By analyzing existing cross correlation between Repsol and Energy Solar Tech, you can compare the effects of market volatilities on Repsol and Energy Solar 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 Energy Solar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Repsol and Energy Solar.

Diversification Opportunities for Repsol and Energy Solar

-0.17

Correlation Coefficient

Repsol  Energy Solar

Good diversification

The 3 months correlation between Repsol and Energy is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Repsol and Energy Solar Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy Solar Tech 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 Energy Solar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy Solar Tech has no effect on the direction of Repsol i.e., Repsol and Energy Solar go up and down completely randomly.

Pair Corralation between Repsol and Energy Solar

Assuming the 90 days trading horizon Repsol is expected to generate 0.63 times more return on investment than Energy Solar. However, Repsol is 1.59 times less risky than Energy Solar. It trades about 0.13 of its potential returns per unit of risk. Energy Solar Tech is currently generating about -0.07 per unit of risk. If you would invest  1,103  in Repsol on December 29, 2024 and sell it today you would earn a total of  143.00  from holding Repsol or generate 12.96% return on investment over 90 days.

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

Repsol  vs.  Energy Solar Tech

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.

Energy Solar Tech

Risk-Adjusted Performance

Very Weak

Over the last 90 days Energy Solar Tech has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Repsol and Energy Solar

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

The idea behind Repsol and Energy Solar Tech 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 Transaction History module to view history of all your transactions and understand their impact on performance.