Correlation Between EON SE and Enel SpA

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

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

Diversification Opportunities for EON SE and Enel SpA

0.84

Correlation Coefficient

EON SE  Enel SpA

Very poor diversification

The 3 months correlation between EON and Enel is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding EON SE and Enel SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enel SpA and EON SE 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 EON SE are associated (or correlated) with Enel SpA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enel SpA has no effect on the direction of EON SE i.e., EON SE and Enel SpA go up and down completely randomly.

Pair Corralation between EON SE and Enel SpA

Assuming the 90 days horizon EON SE is expected to under-perform the Enel SpA. In addition to that, EON SE is 1.29 times more volatile than Enel SpA. It trades about -0.16 of its total potential returns per unit of risk. Enel SpA is currently generating about 0.08 per unit of volatility. If you would invest  703.00  in Enel SpA on September 28, 2024 and sell it today you would earn a total of  18.00  from holding Enel SpA or generate 2.56% return on investment over 90 days.

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

EON SE  vs.  Enel SpA

EON SE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EON SE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward-looking signals remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Enel SpA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Enel SpA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with EON SE and Enel SpA

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

The idea behind EON SE and Enel SpA 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.