Correlation Between Enlight Renewable and Generation Capital

Can any of the company-specific risk be diversified away by investing in both Enlight Renewable and Generation Capital 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 Enlight Renewable and Generation Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Enlight Renewable Energy and Generation Capital, you can compare the effects of market volatilities on Enlight Renewable and Generation Capital 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 Enlight Renewable with a short position of Generation Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enlight Renewable and Generation Capital.

Diversification Opportunities for Enlight Renewable and Generation Capital

0.23

Correlation Coefficient

Enlight Renewable  Generation Capital

Modest diversification

The 3 months correlation between Enlight and Generation is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Enlight Renewable Energy and Generation Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Generation Capital and Enlight Renewable 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 Enlight Renewable Energy are associated (or correlated) with Generation Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Generation Capital has no effect on the direction of Enlight Renewable i.e., Enlight Renewable and Generation Capital go up and down completely randomly.

Pair Corralation between Enlight Renewable and Generation Capital

Assuming the 90 days trading horizon Enlight Renewable is expected to generate 32.89 times less return on investment than Generation Capital. But when comparing it to its historical volatility, Enlight Renewable Energy is 1.1 times less risky than Generation Capital. It trades about 0.01 of its potential returns per unit of risk. Generation Capital is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  6,210  in Generation Capital on September 4, 2024 and sell it today you would earn a total of  1,610  from holding Generation Capital or generate 25.93% return on investment over 90 days.

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

Enlight Renewable Energy  vs.  Generation Capital

Enlight Renewable Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Enlight Renewable Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Enlight Renewable is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Generation Capital

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Generation Capital are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Generation Capital sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Enlight Renewable and Generation Capital

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

The idea behind Enlight Renewable Energy and Generation Capital 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.

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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.