Correlation Between Avista and Enel SpA

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

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

Diversification Opportunities for Avista and Enel SpA

0.78

Correlation Coefficient

Avista  Enel SpA

Poor diversification

The 3 months correlation between Avista and Enel is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Avista and Enel SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enel SpA and Avista 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 Avista are associated (or correlated) with Enel SpA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enel SpA has no effect on the direction of Avista i.e., Avista and Enel SpA go up and down completely randomly.

Pair Corralation between Avista and Enel SpA

Considering the 90-day investment horizon Avista is expected to generate 1.01 times less return on investment than Enel SpA. But when comparing it to its historical volatility, Avista is 1.0 times less risky than Enel SpA. It trades about 0.13 of its potential returns per unit of risk. Enel SpA is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  711.00  in Enel SpA on December 27, 2024 and sell it today you would earn a total of  77.00  from holding Enel SpA or generate 10.83% return on investment over 90 days.

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

Avista  vs.  Enel SpA

Avista

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Avista are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Avista may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Enel SpA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Enel SpA are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent fundamental indicators, Enel SpA may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Avista and Enel SpA

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

The idea behind Avista and Enel SpA 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.

Check out your portfolio center.

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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.