Correlation Between ENCE Energa and Grifols SA

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

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

Diversification Opportunities for ENCE Energa and Grifols SA

0.24

Correlation Coefficient

ENCE Energa  Grifols SA

Modest diversification

The 3 months correlation between ENCE and Grifols is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding ENCE Energa y and Grifols SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grifols SA and ENCE Energa 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 ENCE Energa y are associated (or correlated) with Grifols SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grifols SA has no effect on the direction of ENCE Energa i.e., ENCE Energa and Grifols SA go up and down completely randomly.

Pair Corralation between ENCE Energa and Grifols SA

Assuming the 90 days trading horizon ENCE Energa y is expected to generate 0.51 times more return on investment than Grifols SA. However, ENCE Energa y is 1.97 times less risky than Grifols SA. It trades about 0.05 of its potential returns per unit of risk. Grifols SA is currently generating about -0.03 per unit of risk. If you would invest  290.00  in ENCE Energa y on September 16, 2024 and sell it today you would earn a total of  11.00  from holding ENCE Energa y or generate 3.79% return on investment over 90 days.

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

ENCE Energa y  vs.  Grifols SA

ENCE Energa y

Risk-Adjusted Performance

3 of 100

Insignificant

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

Grifols SA

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with ENCE Energa and Grifols SA

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

The idea behind ENCE Energa y and Grifols 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.