Correlation Between CIE Automotive and Iberpapel Gestion

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

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

Diversification Opportunities for CIE Automotive and Iberpapel Gestion

-0.6

Correlation Coefficient

CIE Automotive  Iberpapel Gestion

Excellent diversification

The 3 months correlation between CIE and Iberpapel is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding CIE Automotive SA and Iberpapel Gestion SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iberpapel Gestion and CIE Automotive 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 CIE Automotive SA are associated (or correlated) with Iberpapel Gestion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iberpapel Gestion has no effect on the direction of CIE Automotive i.e., CIE Automotive and Iberpapel Gestion go up and down completely randomly.

Pair Corralation between CIE Automotive and Iberpapel Gestion

Assuming the 90 days trading horizon CIE Automotive SA is expected to under-perform the Iberpapel Gestion. In addition to that, CIE Automotive is 1.24 times more volatile than Iberpapel Gestion SA. It trades about -0.02 of its total potential returns per unit of risk. Iberpapel Gestion SA is currently generating about 0.03 per unit of volatility. If you would invest  1,815  in Iberpapel Gestion SA on September 5, 2024 and sell it today you would earn a total of  35.00  from holding Iberpapel Gestion SA or generate 1.93% return on investment over 90 days.

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

CIE Automotive SA  vs.  Iberpapel Gestion SA

CIE Automotive SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CIE Automotive SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, CIE Automotive is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Iberpapel Gestion

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Iberpapel Gestion SA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Iberpapel Gestion is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with CIE Automotive and Iberpapel Gestion

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

The idea behind CIE Automotive SA and Iberpapel Gestion 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.

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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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.