Correlation Between ENDESA ADR and CIRCHEM AB

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

By analyzing existing cross correlation between ENDESA ADR 12 and CIRCHEM AB, you can compare the effects of market volatilities on ENDESA ADR and CIRCHEM AB 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 ENDESA ADR with a short position of CIRCHEM AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of ENDESA ADR and CIRCHEM AB.

Diversification Opportunities for ENDESA ADR and CIRCHEM AB

-0.69

Correlation Coefficient

ENDESA ADR  CIRCHEM AB

Excellent diversification

The 3 months correlation between ENDESA and CIRCHEM is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding ENDESA ADR 12 and CIRCHEM AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CIRCHEM AB and ENDESA ADR 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 ENDESA ADR 12 are associated (or correlated) with CIRCHEM AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CIRCHEM AB has no effect on the direction of ENDESA ADR i.e., ENDESA ADR and CIRCHEM AB go up and down completely randomly.

Pair Corralation between ENDESA ADR and CIRCHEM AB

Assuming the 90 days trading horizon ENDESA ADR 12 is expected to generate 0.24 times more return on investment than CIRCHEM AB. However, ENDESA ADR 12 is 4.09 times less risky than CIRCHEM AB. It trades about 0.09 of its potential returns per unit of risk. CIRCHEM AB is currently generating about -0.04 per unit of risk. If you would invest  1,212  in ENDESA ADR 12 on April 24, 2025 and sell it today you would earn a total of  88.00  from holding ENDESA ADR 12 or generate 7.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

ENDESA ADR 12  vs.  CIRCHEM AB

ENDESA ADR 12

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ENDESA ADR 12 are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, ENDESA ADR may actually be approaching a critical reversion point that can send shares even higher in August 2025.

CIRCHEM AB

Risk-Adjusted Performance

Very Weak

Over the last 90 days CIRCHEM AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in August 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with ENDESA ADR and CIRCHEM AB

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

The idea behind ENDESA ADR 12 and CIRCHEM AB 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.