Correlation Between ENEL Societa and Companhia Energetica

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

Diversification Opportunities for ENEL Societa and Companhia Energetica

0.64

Correlation Coefficient

ENEL Societa  Companhia Energetica

Poor diversification

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

Pair Corralation between ENEL Societa and Companhia Energetica

Assuming the 90 days horizon ENEL Societa is expected to generate 1.72 times less return on investment than Companhia Energetica. But when comparing it to its historical volatility, ENEL Societa per is 1.6 times less risky than Companhia Energetica. It trades about 0.1 of its potential returns per unit of risk. Companhia Energetica de is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  184.00  in Companhia Energetica de on November 29, 2024 and sell it today you would earn a total of  7.00  from holding Companhia Energetica de or generate 3.8% return on investment over 90 days.

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

ENEL Societa per  vs.  Companhia Energetica de

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.

Companhia Energetica

Risk-Adjusted Performance

Very Weak

Over the last 90 days Companhia Energetica de has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward indicators, Companhia Energetica is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with ENEL Societa and Companhia Energetica

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

The idea behind ENEL Societa per and Companhia Energetica de 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.