Correlation Between Red Electrica and Via Renewables

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

By analyzing existing cross correlation between Red Electrica Corporacion and Via Renewables, you can compare the effects of market volatilities on Red Electrica and Via Renewables 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 Red Electrica with a short position of Via Renewables. Check out your portfolio center. Please also check ongoing floating volatility patterns of Red Electrica and Via Renewables.

Diversification Opportunities for Red Electrica and Via Renewables

0.76

Correlation Coefficient

Red Electrica  Via Renewables

Poor diversification

The 3 months correlation between Red and Via is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Red Electrica Corporacion and Via Renewables in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Via Renewables and Red Electrica 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 Red Electrica Corporacion are associated (or correlated) with Via Renewables. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Via Renewables has no effect on the direction of Red Electrica i.e., Red Electrica and Via Renewables go up and down completely randomly.

Pair Corralation between Red Electrica and Via Renewables

If you would invest  786.00  in Via Renewables on September 4, 2024 and sell it today you would earn a total of  0.00  from holding Via Renewables or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	2.38%
Values	Daily Returns

Red Electrica Corporacion  vs.  Via Renewables

Red Electrica Corporacion

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Red Electrica Corporacion has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Via Renewables

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Via Renewables has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward indicators, Via Renewables is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Red Electrica and Via Renewables

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

The idea behind Red Electrica Corporacion and Via Renewables 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.