Correlation Between Terra Firma and Enel Chile

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

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

Diversification Opportunities for Terra Firma and Enel Chile

0.39

Correlation Coefficient

Terra Firma  Enel Chile

Weak diversification

The 3 months correlation between Terra and Enel is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Terra Firma Capital and Enel Chile SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enel Chile SA and Terra Firma 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 Terra Firma Capital are associated (or correlated) with Enel Chile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enel Chile SA has no effect on the direction of Terra Firma i.e., Terra Firma and Enel Chile go up and down completely randomly.

Pair Corralation between Terra Firma and Enel Chile

If you would invest  282.00  in Enel Chile SA on October 12, 2024 and sell it today you would earn a total of  8.00  from holding Enel Chile SA or generate 2.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	1.64%
Values	Daily Returns

Terra Firma Capital  vs.  Enel Chile SA

Terra Firma Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Terra Firma Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Terra Firma is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Enel Chile SA

Risk-Adjusted Performance

2 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Enel Chile SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound forward indicators, Enel Chile is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Terra Firma and Enel Chile

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

The idea behind Terra Firma Capital and Enel Chile 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.

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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.