Correlation Between ENCE Energa and Acerinox

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

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

Diversification Opportunities for ENCE Energa and Acerinox

0.29

Correlation Coefficient

ENCE Energa  Acerinox

Modest diversification

The 3 months correlation between ENCE and Acerinox is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding ENCE Energa y and Acerinox in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acerinox and ENCE Energa 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 ENCE Energa y are associated (or correlated) with Acerinox. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Acerinox has no effect on the direction of ENCE Energa i.e., ENCE Energa and Acerinox go up and down completely randomly.

Pair Corralation between ENCE Energa and Acerinox

Assuming the 90 days trading horizon ENCE Energa is expected to generate 4.94 times less return on investment than Acerinox. But when comparing it to its historical volatility, ENCE Energa y is 1.22 times less risky than Acerinox. It trades about 0.05 of its potential returns per unit of risk. Acerinox is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  913.00  in Acerinox on December 30, 2024 and sell it today you would earn a total of  191.00  from holding Acerinox or generate 20.92% return on investment over 90 days.

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

ENCE Energa y  vs.  Acerinox

ENCE Energa y

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ENCE Energa y are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, ENCE Energa is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Acerinox

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Acerinox are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Acerinox exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ENCE Energa and Acerinox

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

The idea behind ENCE Energa y and Acerinox 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.