Correlation Between Enlight Renewable and CenterPoint Energy

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

Diversification Opportunities for Enlight Renewable and CenterPoint Energy

0.51

Correlation Coefficient

Enlight Renewable  CenterPoint Energy

Very weak diversification

The 3 months correlation between Enlight and CenterPoint is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Enlight Renewable Energy and CenterPoint Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CenterPoint Energy 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 CenterPoint Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CenterPoint Energy has no effect on the direction of Enlight Renewable i.e., Enlight Renewable and CenterPoint Energy go up and down completely randomly.

Pair Corralation between Enlight Renewable and CenterPoint Energy

Given the investment horizon of 90 days Enlight Renewable Energy is expected to under-perform the CenterPoint Energy. In addition to that, Enlight Renewable is 1.74 times more volatile than CenterPoint Energy. It trades about -0.15 of its total potential returns per unit of risk. CenterPoint Energy is currently generating about 0.0 per unit of volatility. If you would invest  3,237  in CenterPoint Energy on October 27, 2024 and sell it today you would lose (1.00) from holding CenterPoint Energy or give up 0.03% of portfolio value over 90 days.

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

Enlight Renewable Energy  vs.  CenterPoint Energy

Enlight Renewable Energy

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Enlight Renewable Energy are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable essential indicators, Enlight Renewable is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

CenterPoint Energy

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CenterPoint Energy are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, CenterPoint Energy may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Enlight Renewable and CenterPoint Energy

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

The idea behind Enlight Renewable Energy and CenterPoint Energy 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.