Correlation Between Enel Generacion and Empresa Distribuidora

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

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

Diversification Opportunities for Enel Generacion and Empresa Distribuidora

0.0

Correlation Coefficient

Enel Generacion  Empresa Distribuidora

Pay attention - limited upside

The 3 months correlation between Enel and Empresa is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Enel Generacion Costanera and Empresa Distribuidora Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Empresa Distribuidora and Enel Generacion 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 Enel Generacion Costanera are associated (or correlated) with Empresa Distribuidora. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Empresa Distribuidora has no effect on the direction of Enel Generacion i.e., Enel Generacion and Empresa Distribuidora go up and down completely randomly.

Pair Corralation between Enel Generacion and Empresa Distribuidora

If you would invest  45,300  in Enel Generacion Costanera on December 23, 2024 and sell it today you would earn a total of  8,500  from holding Enel Generacion Costanera or generate 18.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	96.72%
Values	Daily Returns

Enel Generacion Costanera  vs.  Empresa Distribuidora Electric

Enel Generacion Costanera

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Enel Generacion Costanera are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Enel Generacion sustained solid returns over the last few months and may actually be approaching a breakup point.

Empresa Distribuidora

Risk-Adjusted Performance

Very Weak

Over the last 90 days Empresa Distribuidora Electrica has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Empresa Distribuidora is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Enel Generacion and Empresa Distribuidora

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

The idea behind Enel Generacion Costanera and Empresa Distribuidora Electrica 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.