Correlation Between Enel Generacin and Hites SA

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

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

Diversification Opportunities for Enel Generacin and Hites SA

-0.07

Correlation Coefficient

Enel Generacin  Hites SA

Good diversification

The 3 months correlation between Enel and Hites is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Enel Generacin Chile and Hites SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hites SA and Enel Generacin 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 Generacin Chile are associated (or correlated) with Hites SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hites SA has no effect on the direction of Enel Generacin i.e., Enel Generacin and Hites SA go up and down completely randomly.

Pair Corralation between Enel Generacin and Hites SA

Assuming the 90 days trading horizon Enel Generacin Chile is expected to generate about the same return on investment as Hites SA. But, Enel Generacin Chile is 1.56 times less risky than Hites SA. It trades about 0.23 of its potential returns per unit of risk. Hites SA is currently generating about 0.15 per unit of risk. If you would invest  6,300  in Hites SA on December 31, 2024 and sell it today you would earn a total of  900.00  from holding Hites SA or generate 14.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.83%
Values	Daily Returns

Enel Generacin Chile  vs.  Hites SA

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.

Hites SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hites SA are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Hites SA unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Enel Generacin and Hites SA

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

The idea behind Enel Generacin Chile and Hites 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.