Correlation Between Falabella and Enel Amricas

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

By analyzing existing cross correlation between Falabella and Enel Amricas SA, you can compare the effects of market volatilities on Falabella and Enel Amricas 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 Falabella with a short position of Enel Amricas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Falabella and Enel Amricas.

Diversification Opportunities for Falabella and Enel Amricas

-0.37

Correlation Coefficient

Falabella  Enel Amricas

Very good diversification

The 3 months correlation between Falabella and Enel is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Falabella and Enel Amricas SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enel Amricas SA and Falabella 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 Falabella are associated (or correlated) with Enel Amricas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enel Amricas SA has no effect on the direction of Falabella i.e., Falabella and Enel Amricas go up and down completely randomly.

Pair Corralation between Falabella and Enel Amricas

Assuming the 90 days trading horizon Falabella is expected to generate 1.58 times more return on investment than Enel Amricas. However, Falabella is 1.58 times more volatile than Enel Amricas SA. It trades about 0.15 of its potential returns per unit of risk. Enel Amricas SA is currently generating about -0.04 per unit of risk. If you would invest  336,363  in Falabella on December 2, 2024 and sell it today you would earn a total of  39,637  from holding Falabella or generate 11.78% return on investment over 90 days.

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

Falabella  vs.  Enel Amricas SA

Falabella

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Falabella are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain technical and fundamental indicators, Falabella may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Enel Amricas SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Enel Amricas SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Enel Amricas is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Falabella and Enel Amricas

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

The idea behind Falabella and Enel Amricas SA 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.