Correlation Between IDACORP and Endesa SA

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

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

Diversification Opportunities for IDACORP and Endesa SA

-0.28

Correlation Coefficient

IDACORP  Endesa SA

Very good diversification

The 3 months correlation between IDACORP and Endesa is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding IDACORP and Endesa SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Endesa SA ADR and IDACORP 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 IDACORP are associated (or correlated) with Endesa SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Endesa SA ADR has no effect on the direction of IDACORP i.e., IDACORP and Endesa SA go up and down completely randomly.

Pair Corralation between IDACORP and Endesa SA

Considering the 90-day investment horizon IDACORP is expected to generate 0.69 times more return on investment than Endesa SA. However, IDACORP is 1.44 times less risky than Endesa SA. It trades about 0.21 of its potential returns per unit of risk. Endesa SA ADR is currently generating about 0.03 per unit of risk. If you would invest  10,199  in IDACORP on September 3, 2024 and sell it today you would earn a total of  1,489  from holding IDACORP or generate 14.6% return on investment over 90 days.

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

IDACORP  vs.  Endesa SA ADR

IDACORP

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in IDACORP are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain fundamental indicators, IDACORP sustained solid returns over the last few months and may actually be approaching a breakup point.

Endesa SA ADR

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Endesa SA ADR are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Endesa SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with IDACORP and Endesa SA

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

The idea behind IDACORP and Endesa SA 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.