Correlation Between Enel SpA and National Grid
Can any of the company-specific risk be diversified away by investing in both Enel SpA and National Grid 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 National Grid into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Enel SpA and National Grid PLC, you can compare the effects of market volatilities on Enel SpA and National Grid 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 National Grid. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enel SpA and National Grid.
Diversification Opportunities for Enel SpA and National Grid
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Enel and National is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Enel SpA and National Grid PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Grid PLC 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 National Grid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Grid PLC has no effect on the direction of Enel SpA i.e., Enel SpA and National Grid go up and down completely randomly.
Pair Corralation between Enel SpA and National Grid
Assuming the 90 days trading horizon Enel SpA is expected to generate 0.96 times more return on investment than National Grid. However, Enel SpA is 1.05 times less risky than National Grid. It trades about -0.01 of its potential returns per unit of risk. National Grid PLC is currently generating about -0.04 per unit of risk. If you would invest 680.00 in Enel SpA on October 13, 2024 and sell it today you would lose (10.00) from holding Enel SpA or give up 1.47% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 98.33% |
Values | Daily Returns |
Enel SpA vs. National Grid PLC
Performance |
Timeline |
Enel SpA |
National Grid PLC |
Enel SpA and National Grid Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Enel SpA and National Grid
The main advantage of trading using opposite Enel SpA and National Grid positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enel SpA position performs unexpectedly, National Grid 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 National Grid will offset losses from the drop in National Grid's long position.Enel SpA vs. OFFICE DEPOT | Enel SpA vs. CAIRN HOMES EO | Enel SpA vs. ELMOS SEMICONDUCTOR | Enel SpA vs. Focus Home Interactive |
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Check out your portfolio center.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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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