Correlation Between Vulcan Materials and Enel Chile

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

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

Diversification Opportunities for Vulcan Materials and Enel Chile

-0.53

Correlation Coefficient

Vulcan Materials  Enel Chile

Excellent diversification

The 3 months correlation between Vulcan and Enel is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Vulcan Materials 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 Vulcan Materials 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 Vulcan Materials 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 Vulcan Materials i.e., Vulcan Materials and Enel Chile go up and down completely randomly.

Pair Corralation between Vulcan Materials and Enel Chile

Considering the 90-day investment horizon Vulcan Materials is expected to generate 0.99 times more return on investment than Enel Chile. However, Vulcan Materials is 1.01 times less risky than Enel Chile. It trades about 0.07 of its potential returns per unit of risk. Enel Chile SA is currently generating about 0.06 per unit of risk. If you would invest  25,806  in Vulcan Materials on October 26, 2024 and sell it today you would earn a total of  1,632  from holding Vulcan Materials or generate 6.32% return on investment over 90 days.

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

Vulcan Materials  vs.  Enel Chile SA

Vulcan Materials

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vulcan Materials are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak primary indicators, Vulcan Materials may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Enel Chile SA

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Enel Chile SA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak forward indicators, Enel Chile may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Vulcan Materials and Enel Chile

The main advantage of trading using opposite Vulcan Materials and Enel Chile positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vulcan Materials 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 Vulcan Materials 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.

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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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.