Correlation Between ENEL Societa and Energy Of

Can any of the company-specific risk be diversified away by investing in both ENEL Societa and Energy Of 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 Energy Of 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 Energy of Minas, you can compare the effects of market volatilities on ENEL Societa and Energy Of 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 Energy Of. Check out your portfolio center. Please also check ongoing floating volatility patterns of ENEL Societa and Energy Of.

Diversification Opportunities for ENEL Societa and Energy Of

0.08

Correlation Coefficient

ENEL Societa  Energy Of

Significant diversification

The 3 months correlation between ENEL and Energy is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding ENEL Societa per and Energy of Minas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy of Minas 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 Energy Of. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy of Minas has no effect on the direction of ENEL Societa i.e., ENEL Societa and Energy Of go up and down completely randomly.

Pair Corralation between ENEL Societa and Energy Of

Assuming the 90 days horizon ENEL Societa per is expected to under-perform the Energy Of. But the pink sheet apears to be less risky and, when comparing its historical volatility, ENEL Societa per is 1.88 times less risky than Energy Of. The pink sheet trades about -0.08 of its potential returns per unit of risk. The Energy of Minas is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  252.00  in Energy of Minas on August 31, 2024 and sell it today you would lose (4.00) from holding Energy of Minas or give up 1.59% of portfolio value over 90 days.

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

ENEL Societa per  vs.  Energy of Minas

ENEL Societa per

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ENEL Societa per has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, ENEL Societa is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Energy of Minas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Energy of Minas has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Energy Of is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with ENEL Societa and Energy Of

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

The idea behind ENEL Societa per and Energy of Minas 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.