Correlation Between Halliburton and Enel Generacion

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

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

Diversification Opportunities for Halliburton and Enel Generacion

-0.51

Correlation Coefficient

Halliburton  Enel Generacion

Excellent diversification

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

Pair Corralation between Halliburton and Enel Generacion

Assuming the 90 days trading horizon Halliburton is expected to generate 22.09 times less return on investment than Enel Generacion. But when comparing it to its historical volatility, Halliburton Co is 2.18 times less risky than Enel Generacion. It trades about 0.04 of its potential returns per unit of risk. Enel Generacion Costanera is currently generating about 0.41 of returns per unit of risk over similar time horizon. If you would invest  47,200  in Enel Generacion Costanera on October 12, 2024 and sell it today you would earn a total of  14,100  from holding Enel Generacion Costanera or generate 29.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	90.48%
Values	Daily Returns

Halliburton Co  vs.  Enel Generacion Costanera

Halliburton

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Halliburton Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Enel Generacion Costanera

Risk-Adjusted Performance

31 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Enel Generacion Costanera are ranked lower than 31 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Enel Generacion sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Halliburton and Enel Generacion

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

The idea behind Halliburton Co and Enel Generacion Costanera 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.