Correlation Between Arrow Electronics and Enel Chile

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

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

Diversification Opportunities for Arrow Electronics and Enel Chile

-0.29

Correlation Coefficient

Arrow Electronics  Enel Chile

Very good diversification

The 3 months correlation between Arrow and Enel is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Arrow Electronics and Enel Chile SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enel Chile SA and Arrow Electronics 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 Arrow Electronics are associated (or correlated) with Enel Chile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enel Chile SA has no effect on the direction of Arrow Electronics i.e., Arrow Electronics and Enel Chile go up and down completely randomly.

Pair Corralation between Arrow Electronics and Enel Chile

Considering the 90-day investment horizon Arrow Electronics is expected to generate 13.61 times less return on investment than Enel Chile. But when comparing it to its historical volatility, Arrow Electronics is 1.28 times less risky than Enel Chile. It trades about 0.01 of its potential returns per unit of risk. Enel Chile SA is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  179.00  in Enel Chile SA on October 4, 2024 and sell it today you would earn a total of  110.50  from holding Enel Chile SA or generate 61.73% return on investment over 90 days.

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

Arrow Electronics  vs.  Enel Chile SA

Arrow Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arrow Electronics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Enel Chile SA

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Enel Chile SA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound forward indicators, Enel Chile is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Arrow Electronics and Enel Chile

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

The idea behind Arrow Electronics and Enel Chile 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.