Correlation Between ENEL Societa and RWE AG
Can any of the company-specific risk be diversified away by investing in both ENEL Societa and RWE AG 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 RWE AG 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 RWE AG PK, you can compare the effects of market volatilities on ENEL Societa and RWE AG 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 RWE AG. Check out your portfolio center. Please also check ongoing floating volatility patterns of ENEL Societa and RWE AG.
Diversification Opportunities for ENEL Societa and RWE AG
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ENEL and RWE is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding ENEL Societa per and RWE AG PK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RWE AG PK 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 RWE AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RWE AG PK has no effect on the direction of ENEL Societa i.e., ENEL Societa and RWE AG go up and down completely randomly.
Pair Corralation between ENEL Societa and RWE AG
Assuming the 90 days horizon ENEL Societa per is expected to generate 0.78 times more return on investment than RWE AG. However, ENEL Societa per is 1.28 times less risky than RWE AG. It trades about -0.08 of its potential returns per unit of risk. RWE AG PK is currently generating about -0.09 per unit of risk. If you would invest 754.00 in ENEL Societa per on August 31, 2024 and sell it today you would lose (47.00) from holding ENEL Societa per or give up 6.23% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
ENEL Societa per vs. RWE AG PK
Performance |
Timeline |
ENEL Societa per |
RWE AG PK |
ENEL Societa and RWE AG Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with ENEL Societa and RWE AG
The main advantage of trading using opposite ENEL Societa and RWE AG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ENEL Societa position performs unexpectedly, RWE AG 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 RWE AG will offset losses from the drop in RWE AG's long position.ENEL Societa vs. Teleflex Incorporated | ENEL Societa vs. FormFactor | ENEL Societa vs. Catalent | ENEL Societa vs. Taiwan Semiconductor Manufacturing |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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