Correlation Between Enel Chile and Enel Generacin

Can any of the company-specific risk be diversified away by investing in both Enel Chile 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 Chile 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 Chile SA and Enel Generacin Chile, you can compare the effects of market volatilities on Enel Chile 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 Chile with a short position of Enel Generacin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enel Chile and Enel Generacin.

Diversification Opportunities for Enel Chile and Enel Generacin

0.77

Correlation Coefficient

Enel Chile  Enel Generacin

Poor diversification

The 3 months correlation between Enel and Enel is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Enel Chile 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 Chile 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 Chile 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 Chile i.e., Enel Chile and Enel Generacin go up and down completely randomly.

Pair Corralation between Enel Chile and Enel Generacin

Assuming the 90 days trading horizon Enel Chile is expected to generate 1.69 times less return on investment than Enel Generacin. But when comparing it to its historical volatility, Enel Chile SA is 1.1 times less risky than Enel Generacin. It trades about 0.15 of its potential returns per unit of risk. Enel Generacin Chile is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  37,410  in Enel Generacin Chile on December 30, 2024 and sell it today you would earn a total of  6,039  from holding Enel Generacin Chile or generate 16.14% return on investment over 90 days.

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

Enel Chile SA  vs.  Enel Generacin Chile

Enel Chile SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Enel Chile SA are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical indicators, Enel Chile may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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 Chile and Enel Generacin

The main advantage of trading using opposite Enel Chile and Enel Generacin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enel Chile 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 Chile 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.