Correlation Between Enel SpA and EON SE

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

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

Diversification Opportunities for Enel SpA and EON SE

0.77

Correlation Coefficient

Enel SpA  EON SE

Poor diversification

The 3 months correlation between Enel and EON is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Enel SpA and EON SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EON SE 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 EON SE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EON SE has no effect on the direction of Enel SpA i.e., Enel SpA and EON SE go up and down completely randomly.

Pair Corralation between Enel SpA and EON SE

Assuming the 90 days trading horizon Enel SpA is expected to generate 2.01 times less return on investment than EON SE. But when comparing it to its historical volatility, Enel SpA is 2.62 times less risky than EON SE. It trades about 0.17 of its potential returns per unit of risk. EON SE is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,100  in EON SE on December 29, 2024 and sell it today you would earn a total of  270.00  from holding EON SE or generate 24.55% 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.  EON SE

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 unsteady essential indicators, Enel SpA may actually be approaching a critical reversion point that can send shares even higher in April 2025.

EON SE

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in EON SE are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, EON SE reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Enel SpA and EON SE

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

The idea behind Enel SpA and EON SE 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.