Correlation Between Repsol and Acciona

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

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

Diversification Opportunities for Repsol and Acciona

0.36

Correlation Coefficient

Repsol  Acciona

Weak diversification

The 3 months correlation between Repsol and Acciona is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Repsol and Acciona in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acciona and Repsol 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 Repsol are associated (or correlated) with Acciona. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Acciona has no effect on the direction of Repsol i.e., Repsol and Acciona go up and down completely randomly.

Pair Corralation between Repsol and Acciona

Assuming the 90 days trading horizon Repsol is expected to generate 0.77 times more return on investment than Acciona. However, Repsol is 1.3 times less risky than Acciona. It trades about -0.02 of its potential returns per unit of risk. Acciona is currently generating about -0.03 per unit of risk. If you would invest  1,344  in Repsol on September 14, 2024 and sell it today you would lose (207.00) from holding Repsol or give up 15.4% of portfolio value over 90 days.

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

Repsol  vs.  Acciona

Repsol

Risk-Adjusted Performance

0 of 100

Very Weak

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

Acciona

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Acciona has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Repsol and Acciona

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

The idea behind Repsol and Acciona 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.