Correlation Between Enel Amricas and Enel Generacin

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

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

Diversification Opportunities for Enel Amricas and Enel Generacin

0.12

Correlation Coefficient

Enel Amricas  Enel Generacin

Average diversification

The 3 months correlation between Enel and Enel is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Enel Amricas SA and Enel Generacin Chile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enel Generacin Chile and Enel Amricas 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 Enel Amricas SA are associated (or correlated) with Enel Generacin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enel Generacin Chile has no effect on the direction of Enel Amricas i.e., Enel Amricas and Enel Generacin go up and down completely randomly.

Pair Corralation between Enel Amricas and Enel Generacin

Assuming the 90 days trading horizon Enel Amricas is expected to generate 2.77 times less return on investment than Enel Generacin. But when comparing it to its historical volatility, Enel Amricas SA is 1.1 times less risky than Enel Generacin. It trades about 0.09 of its potential returns per unit of risk. Enel Generacin Chile is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  37,682  in Enel Generacin Chile on December 31, 2024 and sell it today you would earn a total of  5,767  from holding Enel Generacin Chile or generate 15.3% return on investment over 90 days.

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

Enel Amricas SA  vs.  Enel Generacin Chile

Enel Amricas SA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Enel Amricas SA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, Enel Amricas is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Enel Generacin Chile

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Enel Generacin Chile are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, Enel Generacin exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Enel Amricas and Enel Generacin

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

The idea behind Enel Amricas SA and Enel Generacin Chile 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.