Correlation Between Enel Generacin and Las Condes

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

Diversification Opportunities for Enel Generacin and Las Condes

0.67

Correlation Coefficient

Enel Generacin  Las Condes

Poor diversification

The 3 months correlation between Enel and Las is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Enel Generacin Chile and Las Condes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Las Condes 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 Las Condes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Las Condes has no effect on the direction of Enel Generacin i.e., Enel Generacin and Las Condes go up and down completely randomly.

Pair Corralation between Enel Generacin and Las Condes

Assuming the 90 days trading horizon Enel Generacin Chile is expected to generate 0.26 times more return on investment than Las Condes. However, Enel Generacin Chile is 3.85 times less risky than Las Condes. It trades about 0.29 of its potential returns per unit of risk. Las Condes is currently generating about 0.05 per unit of risk. If you would invest  36,821  in Enel Generacin Chile on December 2, 2024 and sell it today you would earn a total of  7,062  from holding Enel Generacin Chile or generate 19.18% return on investment over 90 days.

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

Enel Generacin Chile  vs.  Las Condes

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 22 (%) 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.

Las Condes

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Las Condes are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Las Condes may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Enel Generacin and Las Condes

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

The idea behind Enel Generacin Chile and Las Condes 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.