Correlation Between Enel SpA and Avista

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

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

Diversification Opportunities for Enel SpA and Avista

0.64

Correlation Coefficient

Enel SpA  Avista

Poor diversification

The 3 months correlation between Enel and Avista is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Enel SpA and Avista in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avista 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 Avista. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avista has no effect on the direction of Enel SpA i.e., Enel SpA and Avista go up and down completely randomly.

Pair Corralation between Enel SpA and Avista

Assuming the 90 days trading horizon Enel SpA is expected to generate 0.77 times more return on investment than Avista. However, Enel SpA is 1.3 times less risky than Avista. It trades about 0.17 of its potential returns per unit of risk. Avista is currently generating about 0.08 per unit of risk. If you would invest  669.00  in Enel SpA on December 30, 2024 and sell it today you would earn a total of  84.00  from holding Enel SpA or generate 12.56% return on investment over 90 days.

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

Enel SpA  vs.  Avista

Enel SpA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Enel SpA are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain essential indicators, Enel SpA may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Avista

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Avista are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Avista may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Enel SpA and Avista

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

The idea behind Enel SpA and Avista 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.