Correlation Between Repsol SA and Unit

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

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

Diversification Opportunities for Repsol SA and Unit

-0.47

Correlation Coefficient

Repsol SA  Unit

Very good diversification

The 3 months correlation between Repsol and Unit is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Repsol SA and Unit Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Unit and Repsol SA 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 SA are associated (or correlated) with Unit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Unit has no effect on the direction of Repsol SA i.e., Repsol SA and Unit go up and down completely randomly.

Pair Corralation between Repsol SA and Unit

If you would invest  2,942  in Unit Corporation on September 16, 2024 and sell it today you would earn a total of  558.00  from holding Unit Corporation or generate 18.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	4.76%
Values	Daily Returns

Repsol SA  vs.  Unit Corp.

Repsol SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Repsol SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Repsol SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Unit

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Unit Corporation are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Unit exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Repsol SA and Unit

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

The idea behind Repsol SA and Unit Corporation 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.