Correlation Between Repsol and Caixabank

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

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

Diversification Opportunities for Repsol and Caixabank

-0.31

Correlation Coefficient

Repsol  Caixabank

Very good diversification

The 3 months correlation between Repsol and Caixabank is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Repsol and Caixabank SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caixabank SA 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 Caixabank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caixabank SA has no effect on the direction of Repsol i.e., Repsol and Caixabank go up and down completely randomly.

Pair Corralation between Repsol and Caixabank

Assuming the 90 days trading horizon Repsol is expected to under-perform the Caixabank. But the stock apears to be less risky and, when comparing its historical volatility, Repsol is 1.72 times less risky than Caixabank. The stock trades about -0.04 of its potential returns per unit of risk. The Caixabank SA is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  536.00  in Caixabank SA on September 12, 2024 and sell it today you would lose (3.00) from holding Caixabank SA or give up 0.56% of portfolio value over 90 days.

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

Repsol  vs.  Caixabank SA

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.

Caixabank SA

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Repsol and Caixabank

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

The idea behind Repsol and Caixabank 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.