Correlation Between ENEL Societa and Brookfield Infrastructure

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

By analyzing existing cross correlation between ENEL Societa per and Brookfield Infrastructure Partners, you can compare the effects of market volatilities on ENEL Societa and Brookfield Infrastructure 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 Societa with a short position of Brookfield Infrastructure. Check out your portfolio center. Please also check ongoing floating volatility patterns of ENEL Societa and Brookfield Infrastructure.

Diversification Opportunities for ENEL Societa and Brookfield Infrastructure

0.03

Correlation Coefficient

ENEL Societa  Brookfield Infrastructure

Significant diversification

The 3 months correlation between ENEL and Brookfield is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding ENEL Societa per and Brookfield Infrastructure Part in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield Infrastructure and ENEL Societa 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 Societa per are associated (or correlated) with Brookfield Infrastructure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookfield Infrastructure has no effect on the direction of ENEL Societa i.e., ENEL Societa and Brookfield Infrastructure go up and down completely randomly.

Pair Corralation between ENEL Societa and Brookfield Infrastructure

Assuming the 90 days horizon ENEL Societa per is expected to generate 0.6 times more return on investment than Brookfield Infrastructure. However, ENEL Societa per is 1.65 times less risky than Brookfield Infrastructure. It trades about 0.07 of its potential returns per unit of risk. Brookfield Infrastructure Partners is currently generating about -0.06 per unit of risk. If you would invest  697.00  in ENEL Societa per on November 29, 2024 and sell it today you would earn a total of  27.00  from holding ENEL Societa per or generate 3.87% return on investment over 90 days.

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

ENEL Societa per  vs.  Brookfield Infrastructure Part

ENEL Societa per

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ENEL Societa per are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, ENEL Societa is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Brookfield Infrastructure

Risk-Adjusted Performance

Very Weak

Over the last 90 days Brookfield Infrastructure Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unsteady performance, the Stock's forward indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with ENEL Societa and Brookfield Infrastructure

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

The idea behind ENEL Societa per and Brookfield Infrastructure Partners 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.