Correlation Between ENEL Societa and SSE PLC

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

Diversification Opportunities for ENEL Societa and SSE PLC

0.86

Correlation Coefficient

ENEL Societa  SSE PLC

Very poor diversification

The 3 months correlation between ENEL and SSE is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding ENEL Societa per and SSE PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SSE PLC ADR 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 SSE PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SSE PLC ADR has no effect on the direction of ENEL Societa i.e., ENEL Societa and SSE PLC go up and down completely randomly.

Pair Corralation between ENEL Societa and SSE PLC

Assuming the 90 days horizon ENEL Societa per is expected to generate 0.99 times more return on investment than SSE PLC. However, ENEL Societa per is 1.01 times less risky than SSE PLC. It trades about 0.07 of its potential returns per unit of risk. SSE PLC ADR is currently generating about 0.02 per unit of risk. If you would invest  474.00  in ENEL Societa per on October 9, 2024 and sell it today you would earn a total of  243.00  from holding ENEL Societa per or generate 51.27% return on investment over 90 days.

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

ENEL Societa per  vs.  SSE PLC ADR

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.

SSE PLC ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SSE PLC ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with ENEL Societa and SSE PLC

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

The idea behind ENEL Societa per and SSE PLC ADR 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.