Correlation Between C PARAN and SSE PLC

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

By analyzing existing cross correlation between C PARAN EN and SSE PLC ADR, you can compare the effects of market volatilities on C PARAN and SSE PLC 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 C PARAN with a short position of SSE PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of C PARAN and SSE PLC.

Diversification Opportunities for C PARAN and SSE PLC

0.8

Correlation Coefficient

C PARAN  SSE PLC

Very poor diversification

The 3 months correlation between ELP1 and SSE is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding C PARAN EN and SSE PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SSE PLC ADR and C PARAN 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 C PARAN EN are associated (or correlated) with SSE PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SSE PLC ADR has no effect on the direction of C PARAN i.e., C PARAN and SSE PLC go up and down completely randomly.

Pair Corralation between C PARAN and SSE PLC

Assuming the 90 days trading horizon C PARAN EN is expected to generate 1.48 times more return on investment than SSE PLC. However, C PARAN is 1.48 times more volatile than SSE PLC ADR. It trades about -0.07 of its potential returns per unit of risk. SSE PLC ADR is currently generating about -0.19 per unit of risk. If you would invest  628.00  in C PARAN EN on September 23, 2024 and sell it today you would lose (68.00) from holding C PARAN EN or give up 10.83% of portfolio value over 90 days.

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

C PARAN EN  vs.  SSE PLC ADR

C PARAN EN

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days C PARAN EN has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

SSE PLC ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SSE PLC ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with C PARAN and SSE PLC

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

The idea behind C PARAN EN and SSE PLC ADR 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.