Correlation Between ENN Energy and CenterPoint Energy

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

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

Diversification Opportunities for ENN Energy and CenterPoint Energy

-0.37

Correlation Coefficient

ENN Energy  CenterPoint Energy

Very good diversification

The 3 months correlation between ENN and CenterPoint is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding ENN Energy Holdings and CenterPoint Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CenterPoint Energy and ENN Energy 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 ENN Energy Holdings are associated (or correlated) with CenterPoint Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CenterPoint Energy has no effect on the direction of ENN Energy i.e., ENN Energy and CenterPoint Energy go up and down completely randomly.

Pair Corralation between ENN Energy and CenterPoint Energy

Assuming the 90 days trading horizon ENN Energy is expected to generate 2.53 times less return on investment than CenterPoint Energy. In addition to that, ENN Energy is 1.64 times more volatile than CenterPoint Energy. It trades about 0.02 of its total potential returns per unit of risk. CenterPoint Energy is currently generating about 0.07 per unit of volatility. If you would invest  3,040  in CenterPoint Energy on December 1, 2024 and sell it today you would earn a total of  160.00  from holding CenterPoint Energy or generate 5.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

ENN Energy Holdings  vs.  CenterPoint Energy

ENN Energy Holdings

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ENN Energy Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical indicators, ENN Energy is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

CenterPoint Energy

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CenterPoint Energy are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, CenterPoint Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with ENN Energy and CenterPoint Energy

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

The idea behind ENN Energy Holdings and CenterPoint 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.

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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.