Correlation Between CHINA SOUTHN and IBERDROLA ADR/1

Can any of the company-specific risk be diversified away by investing in both CHINA SOUTHN and IBERDROLA ADR/1 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 CHINA SOUTHN and IBERDROLA ADR/1 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CHINA SOUTHN AIR H and IBERDROLA ADR1 EO, you can compare the effects of market volatilities on CHINA SOUTHN and IBERDROLA ADR/1 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 CHINA SOUTHN with a short position of IBERDROLA ADR/1. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHINA SOUTHN and IBERDROLA ADR/1.

Diversification Opportunities for CHINA SOUTHN and IBERDROLA ADR/1

-0.59

Correlation Coefficient

CHINA SOUTHN  IBERDROLA ADR/1

Excellent diversification

The 3 months correlation between CHINA and IBERDROLA is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding CHINA SOUTHN AIR H and IBERDROLA ADR1 EO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IBERDROLA ADR1 EO and CHINA SOUTHN 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 CHINA SOUTHN AIR H are associated (or correlated) with IBERDROLA ADR/1. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IBERDROLA ADR1 EO has no effect on the direction of CHINA SOUTHN i.e., CHINA SOUTHN and IBERDROLA ADR/1 go up and down completely randomly.

Pair Corralation between CHINA SOUTHN and IBERDROLA ADR/1

Assuming the 90 days trading horizon CHINA SOUTHN AIR H is expected to under-perform the IBERDROLA ADR/1. In addition to that, CHINA SOUTHN is 2.45 times more volatile than IBERDROLA ADR1 EO. It trades about -0.08 of its total potential returns per unit of risk. IBERDROLA ADR1 EO is currently generating about 0.13 per unit of volatility. If you would invest  5,114  in IBERDROLA ADR1 EO on December 24, 2024 and sell it today you would earn a total of  486.00  from holding IBERDROLA ADR1 EO or generate 9.5% return on investment over 90 days.

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

CHINA SOUTHN AIR H   vs.  IBERDROLA ADR1 EO

CHINA SOUTHN AIR

Risk-Adjusted Performance

Very Weak

Over the last 90 days CHINA SOUTHN AIR H has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

IBERDROLA ADR1 EO

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in IBERDROLA ADR1 EO are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady technical and fundamental indicators, IBERDROLA ADR/1 may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with CHINA SOUTHN and IBERDROLA ADR/1

The main advantage of trading using opposite CHINA SOUTHN and IBERDROLA ADR/1 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CHINA SOUTHN position performs unexpectedly, IBERDROLA ADR/1 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 IBERDROLA ADR/1 will offset losses from the drop in IBERDROLA ADR/1's long position.

The idea behind CHINA SOUTHN AIR H and IBERDROLA ADR1 EO 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.