Correlation Between Hispanotels Inversiones and Elecnor SA

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

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

Diversification Opportunities for Hispanotels Inversiones and Elecnor SA

0.65

Correlation Coefficient

Hispanotels Inversiones  Elecnor SA

Poor diversification

The 3 months correlation between Hispanotels and Elecnor is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Hispanotels Inversiones SOCIMI and Elecnor SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elecnor SA and Hispanotels Inversiones 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 Hispanotels Inversiones SOCIMI are associated (or correlated) with Elecnor SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elecnor SA has no effect on the direction of Hispanotels Inversiones i.e., Hispanotels Inversiones and Elecnor SA go up and down completely randomly.

Pair Corralation between Hispanotels Inversiones and Elecnor SA

Assuming the 90 days trading horizon Hispanotels Inversiones is expected to generate 1.25 times less return on investment than Elecnor SA. But when comparing it to its historical volatility, Hispanotels Inversiones SOCIMI is 3.33 times less risky than Elecnor SA. It trades about 0.32 of its potential returns per unit of risk. Elecnor SA is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,489  in Elecnor SA on October 21, 2024 and sell it today you would earn a total of  249.00  from holding Elecnor SA or generate 16.72% return on investment over 90 days.

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

Hispanotels Inversiones SOCIMI  vs.  Elecnor SA

Hispanotels Inversiones

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hispanotels Inversiones SOCIMI are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Hispanotels Inversiones exhibited solid returns over the last few months and may actually be approaching a breakup point.

Elecnor SA

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Elecnor SA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Elecnor SA exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hispanotels Inversiones and Elecnor SA

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

The idea behind Hispanotels Inversiones SOCIMI and Elecnor 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.

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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.