Correlation Between Enel Chile and NiSource

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

Diversification Opportunities for Enel Chile and NiSource

0.17

Correlation Coefficient

Enel Chile  NiSource

Average diversification

The 3 months correlation between Enel and NiSource is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Enel Chile SA and NiSource in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NiSource 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 NiSource. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NiSource has no effect on the direction of Enel Chile i.e., Enel Chile and NiSource go up and down completely randomly.

Pair Corralation between Enel Chile and NiSource

Given the investment horizon of 90 days Enel Chile SA is expected to generate 1.79 times more return on investment than NiSource. However, Enel Chile is 1.79 times more volatile than NiSource. It trades about 0.06 of its potential returns per unit of risk. NiSource is currently generating about 0.07 per unit of risk. If you would invest  178.00  in Enel Chile SA on October 11, 2024 and sell it today you would earn a total of  112.00  from holding Enel Chile SA or generate 62.92% return on investment over 90 days.

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

Enel Chile SA  vs.  NiSource

Enel Chile SA

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Enel Chile SA are ranked lower than 6 (%) 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 February 2025.

NiSource

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NiSource are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak forward indicators, NiSource may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Enel Chile and NiSource

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

The idea behind Enel Chile SA and NiSource 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.