Correlation Between Enel Generacin and Sociedad Matriz

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

Diversification Opportunities for Enel Generacin and Sociedad Matriz

0.62

Correlation Coefficient

Enel Generacin  Sociedad Matriz

Poor diversification

The 3 months correlation between Enel and Sociedad is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Enel Generacin Chile and Sociedad Matriz SAAM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sociedad Matriz SAAM 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 Sociedad Matriz. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sociedad Matriz SAAM has no effect on the direction of Enel Generacin i.e., Enel Generacin and Sociedad Matriz go up and down completely randomly.

Pair Corralation between Enel Generacin and Sociedad Matriz

Assuming the 90 days trading horizon Enel Generacin Chile is expected to generate 1.46 times more return on investment than Sociedad Matriz. However, Enel Generacin is 1.46 times more volatile than Sociedad Matriz SAAM. It trades about 0.24 of its potential returns per unit of risk. Sociedad Matriz SAAM is currently generating about 0.19 per unit of risk. 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 Generacin Chile  vs.  Sociedad Matriz SAAM

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.

Sociedad Matriz SAAM

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sociedad Matriz SAAM are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Sociedad Matriz may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Enel Generacin and Sociedad Matriz

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

The idea behind Enel Generacin Chile and Sociedad Matriz SAAM 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.