Correlation Between United Internet and Repsol SA

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

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

Diversification Opportunities for United Internet and Repsol SA

0.33

Correlation Coefficient

United Internet  Repsol SA

Weak diversification

The 3 months correlation between United and Repsol is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding United Internet AG and Repsol SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Repsol SA and United Internet 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 United Internet AG are associated (or correlated) with Repsol SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Repsol SA has no effect on the direction of United Internet i.e., United Internet and Repsol SA go up and down completely randomly.

Pair Corralation between United Internet and Repsol SA

Assuming the 90 days trading horizon United Internet AG is expected to under-perform the Repsol SA. In addition to that, United Internet is 2.17 times more volatile than Repsol SA. It trades about -0.08 of its total potential returns per unit of risk. Repsol SA is currently generating about -0.04 per unit of volatility. If you would invest  1,174  in Repsol SA on September 14, 2024 and sell it today you would lose (39.00) from holding Repsol SA or give up 3.32% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

United Internet AG  vs.  Repsol SA

United Internet AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United Internet AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

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 comparatively stable basic indicators, Repsol SA is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with United Internet and Repsol SA

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

The idea behind United Internet AG and Repsol 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..