Correlation Between Orsted A/S and Atlantica Sustainable

Can any of the company-specific risk be diversified away by investing in both Orsted A/S and Atlantica Sustainable 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 Orsted A/S and Atlantica Sustainable into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Orsted AS ADR and Atlantica Sustainable Infrastructure, you can compare the effects of market volatilities on Orsted A/S and Atlantica Sustainable 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 Orsted A/S with a short position of Atlantica Sustainable. Check out your portfolio center. Please also check ongoing floating volatility patterns of Orsted A/S and Atlantica Sustainable.

Diversification Opportunities for Orsted A/S and Atlantica Sustainable

-0.52

Correlation Coefficient

Orsted A/S  Atlantica Sustainable

Excellent diversification

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

Pair Corralation between Orsted A/S and Atlantica Sustainable

Assuming the 90 days horizon Orsted AS ADR is expected to under-perform the Atlantica Sustainable. In addition to that, Orsted A/S is 23.51 times more volatile than Atlantica Sustainable Infrastructure. It trades about -0.02 of its total potential returns per unit of risk. Atlantica Sustainable Infrastructure is currently generating about 0.2 per unit of volatility. If you would invest  2,162  in Atlantica Sustainable Infrastructure on September 1, 2024 and sell it today you would earn a total of  32.00  from holding Atlantica Sustainable Infrastructure or generate 1.48% return on investment over 90 days.

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

Orsted AS ADR  vs.  Atlantica Sustainable Infrastr

Orsted AS ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Orsted AS ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Orsted A/S is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Atlantica Sustainable

Risk-Adjusted Performance

15 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Atlantica Sustainable Infrastructure are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Atlantica Sustainable is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Orsted A/S and Atlantica Sustainable

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

The idea behind Orsted AS ADR and Atlantica Sustainable Infrastructure 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.