Correlation Between Enel Chile and TKO Group

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

Diversification Opportunities for Enel Chile and TKO Group

0.28

Correlation Coefficient

Enel Chile  TKO Group

Modest diversification

The 3 months correlation between Enel and TKO is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Enel Chile SA and TKO Group Holdings, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TKO Group Holdings, 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 TKO Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TKO Group Holdings, has no effect on the direction of Enel Chile i.e., Enel Chile and TKO Group go up and down completely randomly.

Pair Corralation between Enel Chile and TKO Group

Given the investment horizon of 90 days Enel Chile is expected to generate 1.67 times less return on investment than TKO Group. But when comparing it to its historical volatility, Enel Chile SA is 1.01 times less risky than TKO Group. It trades about 0.12 of its potential returns per unit of risk. TKO Group Holdings, is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  13,279  in TKO Group Holdings, on September 21, 2024 and sell it today you would earn a total of  1,075  from holding TKO Group Holdings, or generate 8.1% 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.  TKO Group Holdings,

Enel Chile SA

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Enel Chile SA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak forward indicators, Enel Chile exhibited solid returns over the last few months and may actually be approaching a breakup point.

TKO Group Holdings,

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TKO Group Holdings, are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady forward-looking signals, TKO Group displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Enel Chile and TKO Group

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

The idea behind Enel Chile SA and TKO Group Holdings, 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.