Correlation Between Repsol and Mapfre

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

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

Diversification Opportunities for Repsol and Mapfre

0.51

Correlation Coefficient

Repsol  Mapfre

Very weak diversification

The 3 months correlation between Repsol and Mapfre is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Repsol and Mapfre in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mapfre 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 Mapfre. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mapfre has no effect on the direction of Repsol i.e., Repsol and Mapfre go up and down completely randomly.

Pair Corralation between Repsol and Mapfre

Assuming the 90 days trading horizon Repsol is expected to generate 1.28 times less return on investment than Mapfre. In addition to that, Repsol is 1.12 times more volatile than Mapfre. It trades about 0.13 of its total potential returns per unit of risk. Mapfre is currently generating about 0.19 per unit of volatility. If you would invest  244.00  in Mapfre on December 29, 2024 and sell it today you would earn a total of  42.00  from holding Mapfre or generate 17.21% return on investment over 90 days.

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

Repsol  vs.  Mapfre

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.

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.

Pair Trading with Repsol and Mapfre

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

The idea behind Repsol and Mapfre 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.