Correlation Between Enel SpA and Lifeway Foods

Can any of the company-specific risk be diversified away by investing in both Enel SpA and Lifeway Foods 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 SpA and Lifeway Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Enel SpA and Lifeway Foods, you can compare the effects of market volatilities on Enel SpA and Lifeway Foods 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 SpA with a short position of Lifeway Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enel SpA and Lifeway Foods.

Diversification Opportunities for Enel SpA and Lifeway Foods

0.56

Correlation Coefficient

Enel SpA  Lifeway Foods

Very weak diversification

The 3 months correlation between Enel and Lifeway is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Enel SpA and Lifeway Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lifeway Foods and Enel SpA 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 SpA are associated (or correlated) with Lifeway Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lifeway Foods has no effect on the direction of Enel SpA i.e., Enel SpA and Lifeway Foods go up and down completely randomly.

Pair Corralation between Enel SpA and Lifeway Foods

Assuming the 90 days horizon Enel SpA is expected to generate 0.3 times more return on investment than Lifeway Foods. However, Enel SpA is 3.39 times less risky than Lifeway Foods. It trades about -0.06 of its potential returns per unit of risk. Lifeway Foods is currently generating about -0.02 per unit of risk. If you would invest  720.00  in Enel SpA on October 15, 2024 and sell it today you would lose (29.00) from holding Enel SpA or give up 4.03% of portfolio value over 90 days.

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

Enel SpA  vs.  Lifeway Foods

Enel SpA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Enel SpA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Enel SpA is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Lifeway Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lifeway Foods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Lifeway Foods is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Enel SpA and Lifeway Foods

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

The idea behind Enel SpA and Lifeway Foods 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.