Correlation Between ENN Energy and Tokyo Gas

Can any of the company-specific risk be diversified away by investing in both ENN Energy and Tokyo Gas 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 Tokyo Gas 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 Tokyo Gas CoLtd, you can compare the effects of market volatilities on ENN Energy and Tokyo Gas 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 Tokyo Gas. Check out your portfolio center. Please also check ongoing floating volatility patterns of ENN Energy and Tokyo Gas.

Diversification Opportunities for ENN Energy and Tokyo Gas

0.15

Correlation Coefficient

ENN Energy  Tokyo Gas

Average diversification

The 3 months correlation between ENN and Tokyo is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding ENN Energy Holdings and Tokyo Gas CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tokyo Gas CoLtd 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 Tokyo Gas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tokyo Gas CoLtd has no effect on the direction of ENN Energy i.e., ENN Energy and Tokyo Gas go up and down completely randomly.

Pair Corralation between ENN Energy and Tokyo Gas

Assuming the 90 days trading horizon ENN Energy Holdings is expected to generate 1.28 times more return on investment than Tokyo Gas. However, ENN Energy is 1.28 times more volatile than Tokyo Gas CoLtd. It trades about 0.08 of its potential returns per unit of risk. Tokyo Gas CoLtd is currently generating about 0.1 per unit of risk. If you would invest  690.00  in ENN Energy Holdings on December 28, 2024 and sell it today you would earn a total of  75.00  from holding ENN Energy Holdings or generate 10.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

ENN Energy Holdings  vs.  Tokyo Gas CoLtd

ENN Energy Holdings

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ENN Energy Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical indicators, ENN Energy may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Tokyo Gas CoLtd

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tokyo Gas CoLtd are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Tokyo Gas may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with ENN Energy and Tokyo Gas

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

The idea behind ENN Energy Holdings and Tokyo Gas CoLtd 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..