Correlation Between Energy Of and ENEL Societa

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

By analyzing existing cross correlation between Energy of Minas and ENEL Societa per, you can compare the effects of market volatilities on Energy Of and ENEL Societa 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 Energy Of with a short position of ENEL Societa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energy Of and ENEL Societa.

Diversification Opportunities for Energy Of and ENEL Societa

0.08

Correlation Coefficient

Energy Of  ENEL Societa

Significant diversification

The 3 months correlation between Energy and ENEL is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Energy of Minas and ENEL Societa per in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ENEL Societa per and Energy Of 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 Energy of Minas are associated (or correlated) with ENEL Societa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ENEL Societa per has no effect on the direction of Energy Of i.e., Energy Of and ENEL Societa go up and down completely randomly.

Pair Corralation between Energy Of and ENEL Societa

Assuming the 90 days horizon Energy of Minas is expected to generate 1.88 times more return on investment than ENEL Societa. However, Energy Of is 1.88 times more volatile than ENEL Societa per. It trades about 0.0 of its potential returns per unit of risk. ENEL Societa per is currently generating about -0.08 per unit of risk. If you would invest  252.00  in Energy of Minas on August 31, 2024 and sell it today you would lose (4.00) from holding Energy of Minas or give up 1.59% of portfolio value over 90 days.

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

Energy of Minas  vs.  ENEL Societa per

Energy of Minas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Energy of Minas has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Energy Of is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

ENEL Societa per

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ENEL Societa per has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, ENEL Societa is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Energy Of and ENEL Societa

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

The idea behind Energy of Minas and ENEL Societa per 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.