Correlation Between Vita Coco and Enlight Renewable

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

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

Diversification Opportunities for Vita Coco and Enlight Renewable

0.33

Correlation Coefficient

Vita Coco  Enlight Renewable

Weak diversification

The 3 months correlation between Vita and Enlight is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Vita Coco and Enlight Renewable Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enlight Renewable Energy and Vita Coco 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 Vita Coco are associated (or correlated) with Enlight Renewable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enlight Renewable Energy has no effect on the direction of Vita Coco i.e., Vita Coco and Enlight Renewable go up and down completely randomly.

Pair Corralation between Vita Coco and Enlight Renewable

Given the investment horizon of 90 days Vita Coco is expected to under-perform the Enlight Renewable. But the stock apears to be less risky and, when comparing its historical volatility, Vita Coco is 1.53 times less risky than Enlight Renewable. The stock trades about -0.14 of its potential returns per unit of risk. The Enlight Renewable Energy is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  1,612  in Enlight Renewable Energy on October 5, 2024 and sell it today you would earn a total of  121.00  from holding Enlight Renewable Energy or generate 7.51% return on investment over 90 days.

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

Vita Coco  vs.  Enlight Renewable Energy

Vita Coco

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Vita Coco are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal fundamental indicators, Vita Coco displayed solid returns over the last few months and may actually be approaching a breakup point.

Enlight Renewable Energy

Risk-Adjusted Performance

7 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Enlight Renewable Energy are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile essential indicators, Enlight Renewable unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vita Coco and Enlight Renewable

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

The idea behind Vita Coco and Enlight Renewable Energy 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.