Correlation Between Enel Chile and CenterPoint Energy

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

Diversification Opportunities for Enel Chile and CenterPoint Energy

0.31

Correlation Coefficient

Enel Chile  CenterPoint Energy

Weak diversification

The 3 months correlation between Enel and CenterPoint is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Enel Chile SA and CenterPoint Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CenterPoint Energy 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 CenterPoint Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CenterPoint Energy has no effect on the direction of Enel Chile i.e., Enel Chile and CenterPoint Energy go up and down completely randomly.

Pair Corralation between Enel Chile and CenterPoint Energy

Given the investment horizon of 90 days Enel Chile is expected to generate 1.52 times less return on investment than CenterPoint Energy. In addition to that, Enel Chile is 1.35 times more volatile than CenterPoint Energy. It trades about 0.09 of its total potential returns per unit of risk. CenterPoint Energy is currently generating about 0.18 per unit of volatility. If you would invest  2,802  in CenterPoint Energy on September 18, 2024 and sell it today you would earn a total of  405.00  from holding CenterPoint Energy or generate 14.45% return on investment over 90 days.

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

Enel Chile SA  vs.  CenterPoint Energy

Enel Chile SA

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Enel Chile SA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak forward indicators, Enel Chile may actually be approaching a critical reversion point that can send shares even higher in January 2025.

CenterPoint Energy

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CenterPoint Energy are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, CenterPoint Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Enel Chile and CenterPoint Energy

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

The idea behind Enel Chile SA and CenterPoint Energy 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.