Correlation Between Transportadora and Enel Generacion

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

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

Diversification Opportunities for Transportadora and Enel Generacion

0.26

Correlation Coefficient

Transportadora  Enel Generacion

Modest diversification

The 3 months correlation between Transportadora and Enel is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Transportadora de Gas 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 Transportadora 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 Transportadora de Gas 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 Transportadora i.e., Transportadora and Enel Generacion go up and down completely randomly.

Pair Corralation between Transportadora and Enel Generacion

Assuming the 90 days trading horizon Transportadora is expected to generate 2.4 times less return on investment than Enel Generacion. In addition to that, Transportadora is 1.15 times more volatile than Enel Generacion Costanera. It trades about 0.03 of its total potential returns per unit of risk. Enel Generacion Costanera is currently generating about 0.08 per unit of volatility. If you would invest  47,250  in Enel Generacion Costanera on December 25, 2024 and sell it today you would earn a total of  6,550  from holding Enel Generacion Costanera or generate 13.86% return on investment over 90 days.

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

Transportadora de Gas  vs.  Enel Generacion Costanera

Transportadora de Gas

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Transportadora de Gas are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Transportadora may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Enel Generacion Costanera

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Enel Generacion Costanera are ranked lower than 6 (%) 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 Transportadora and Enel Generacion

The main advantage of trading using opposite Transportadora and Enel Generacion positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transportadora 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 Transportadora de Gas 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.