Correlation Between CIE Automotive and ENCE Energa

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

By analyzing existing cross correlation between CIE Automotive SA and ENCE Energa y, you can compare the effects of market volatilities on CIE Automotive and ENCE Energa 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 CIE Automotive with a short position of ENCE Energa. Check out your portfolio center. Please also check ongoing floating volatility patterns of CIE Automotive and ENCE Energa.

Diversification Opportunities for CIE Automotive and ENCE Energa

-0.01

Correlation Coefficient

CIE Automotive  ENCE Energa

Good diversification

The 3 months correlation between CIE and ENCE is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding CIE Automotive SA and ENCE Energa y in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ENCE Energa y and CIE Automotive 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 CIE Automotive SA are associated (or correlated) with ENCE Energa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ENCE Energa y has no effect on the direction of CIE Automotive i.e., CIE Automotive and ENCE Energa go up and down completely randomly.

Pair Corralation between CIE Automotive and ENCE Energa

Assuming the 90 days trading horizon CIE Automotive SA is expected to under-perform the ENCE Energa. But the stock apears to be less risky and, when comparing its historical volatility, CIE Automotive SA is 1.25 times less risky than ENCE Energa. The stock trades about -0.12 of its potential returns per unit of risk. The ENCE Energa y is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  270.00  in ENCE Energa y on December 1, 2024 and sell it today you would earn a total of  65.00  from holding ENCE Energa y or generate 24.07% return on investment over 90 days.

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

CIE Automotive SA  vs.  ENCE Energa y

CIE Automotive SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days CIE Automotive SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

ENCE Energa y

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ENCE Energa y are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, ENCE Energa exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CIE Automotive and ENCE Energa

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

The idea behind CIE Automotive SA and ENCE Energa y 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.