Correlation Between ENEL Societa and Otter Tail

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

Diversification Opportunities for ENEL Societa and Otter Tail

-0.44

Correlation Coefficient

ENEL Societa  Otter Tail

Very good diversification

The 3 months correlation between ENEL and Otter is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding ENEL Societa per and Otter Tail in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Otter Tail 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 Otter Tail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Otter Tail has no effect on the direction of ENEL Societa i.e., ENEL Societa and Otter Tail go up and down completely randomly.

Pair Corralation between ENEL Societa and Otter Tail

Assuming the 90 days horizon ENEL Societa per is expected to under-perform the Otter Tail. But the pink sheet apears to be less risky and, when comparing its historical volatility, ENEL Societa per is 1.41 times less risky than Otter Tail. The pink sheet trades about -0.08 of its potential returns per unit of risk. The Otter Tail is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  8,076  in Otter Tail on August 31, 2024 and sell it today you would earn a total of  12.00  from holding Otter Tail or generate 0.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

ENEL Societa per  vs.  Otter Tail

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.

Otter Tail

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Otter Tail has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Otter Tail is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with ENEL Societa and Otter Tail

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

The idea behind ENEL Societa per and Otter Tail 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.