Correlation Between East Africa and Enel Chile

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

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

Diversification Opportunities for East Africa and Enel Chile

0.0

Correlation Coefficient

East Africa  Enel Chile

Pay attention - limited upside

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

Pair Corralation between East Africa and Enel Chile

If you would invest  275.00  in Enel Chile SA on December 18, 2024 and sell it today you would earn a total of  71.00  from holding Enel Chile SA or generate 25.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	93.65%
Values	Daily Returns

East Africa Metals  vs.  Enel Chile SA

East Africa Metals

Risk-Adjusted Performance

Very Weak

Over the last 90 days East Africa Metals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, East Africa is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Enel Chile SA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Enel Chile SA are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak forward indicators, Enel Chile exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with East Africa and Enel Chile

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

The idea behind East Africa Metals and Enel Chile SA 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.