Correlation Between Caixabank and CES Energy

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

By analyzing existing cross correlation between Caixabank SA ADR and CES Energy Solutions, you can compare the effects of market volatilities on Caixabank and CES Energy 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 Caixabank with a short position of CES Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caixabank and CES Energy.

Diversification Opportunities for Caixabank and CES Energy

-0.52

Correlation Coefficient

Caixabank  CES Energy

Excellent diversification

The 3 months correlation between Caixabank and CES is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Caixabank SA ADR and CES Energy Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CES Energy Solutions and Caixabank 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 Caixabank SA ADR are associated (or correlated) with CES Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CES Energy Solutions has no effect on the direction of Caixabank i.e., Caixabank and CES Energy go up and down completely randomly.

Pair Corralation between Caixabank and CES Energy

Assuming the 90 days horizon Caixabank SA ADR is expected to under-perform the CES Energy. But the pink sheet apears to be less risky and, when comparing its historical volatility, Caixabank SA ADR is 1.24 times less risky than CES Energy. The pink sheet trades about -0.06 of its potential returns per unit of risk. The CES Energy Solutions is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  531.00  in CES Energy Solutions on September 13, 2024 and sell it today you would earn a total of  150.00  from holding CES Energy Solutions or generate 28.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Caixabank SA ADR  vs.  CES Energy Solutions

Caixabank SA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Caixabank SA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

CES Energy Solutions

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CES Energy Solutions are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, CES Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Caixabank and CES Energy

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

The idea behind Caixabank SA ADR and CES Energy Solutions 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.