Correlation Between Banco De and Enel Generacin

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

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

Diversification Opportunities for Banco De and Enel Generacin

0.91

Correlation Coefficient

Banco De  Enel Generacin

Almost no diversification

The 3 months correlation between Banco and Enel is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Banco de Credito and Enel Generacin Chile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enel Generacin Chile and Banco De 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 Banco de Credito are associated (or correlated) with Enel Generacin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enel Generacin Chile has no effect on the direction of Banco De i.e., Banco De and Enel Generacin go up and down completely randomly.

Pair Corralation between Banco De and Enel Generacin

Assuming the 90 days trading horizon Banco de Credito is expected to generate 1.08 times more return on investment than Enel Generacin. However, Banco De is 1.08 times more volatile than Enel Generacin Chile. It trades about 0.36 of its potential returns per unit of risk. Enel Generacin Chile is currently generating about 0.24 per unit of risk. If you would invest  2,760,000  in Banco de Credito on December 30, 2024 and sell it today you would earn a total of  769,000  from holding Banco de Credito or generate 27.86% return on investment over 90 days.

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

Banco de Credito  vs.  Enel Generacin Chile

Banco de Credito

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Banco de Credito are ranked lower than 28 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating forward indicators, Banco De displayed solid returns over the last few months and may actually be approaching a breakup point.

Enel Generacin Chile

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Enel Generacin Chile are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, Enel Generacin exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Banco De and Enel Generacin

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

The idea behind Banco de Credito and Enel Generacin Chile 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.