Correlation Between GENERAL and Enlight Renewable

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

By analyzing existing cross correlation between GENERAL ELEC CAP and Enlight Renewable Energy, you can compare the effects of market volatilities on GENERAL and Enlight Renewable 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 GENERAL with a short position of Enlight Renewable. Check out your portfolio center. Please also check ongoing floating volatility patterns of GENERAL and Enlight Renewable.

Diversification Opportunities for GENERAL and Enlight Renewable

0.34

Correlation Coefficient

GENERAL  Enlight Renewable

Weak diversification

The 3 months correlation between GENERAL and Enlight is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding GENERAL ELEC CAP and Enlight Renewable Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enlight Renewable Energy and GENERAL 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 GENERAL ELEC CAP are associated (or correlated) with Enlight Renewable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enlight Renewable Energy has no effect on the direction of GENERAL i.e., GENERAL and Enlight Renewable go up and down completely randomly.

Pair Corralation between GENERAL and Enlight Renewable

Assuming the 90 days trading horizon GENERAL is expected to generate 12.65 times less return on investment than Enlight Renewable. But when comparing it to its historical volatility, GENERAL ELEC CAP is 4.88 times less risky than Enlight Renewable. It trades about 0.02 of its potential returns per unit of risk. Enlight Renewable Energy is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,574  in Enlight Renewable Energy on October 11, 2024 and sell it today you would earn a total of  124.00  from holding Enlight Renewable Energy or generate 7.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	20.97%
Values	Daily Returns

GENERAL ELEC CAP  vs.  Enlight Renewable Energy

GENERAL ELEC CAP

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in GENERAL ELEC CAP are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, GENERAL is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Enlight Renewable Energy

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Enlight Renewable Energy are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile essential indicators, Enlight Renewable may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with GENERAL and Enlight Renewable

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

The idea behind GENERAL ELEC CAP and Enlight Renewable 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.