Correlation Between ENN Energy and Carsales

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

Diversification Opportunities for ENN Energy and Carsales

0.02

Correlation Coefficient

ENN Energy  Carsales

Significant diversification

The 3 months correlation between ENN and Carsales is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding ENN Energy Holdings and CarsalesCom in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarsalesCom 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 Carsales. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CarsalesCom has no effect on the direction of ENN Energy i.e., ENN Energy and Carsales go up and down completely randomly.

Pair Corralation between ENN Energy and Carsales

Assuming the 90 days trading horizon ENN Energy is expected to generate 1.91 times less return on investment than Carsales. In addition to that, ENN Energy is 2.18 times more volatile than CarsalesCom. It trades about 0.02 of its total potential returns per unit of risk. CarsalesCom is currently generating about 0.07 per unit of volatility. If you would invest  1,347  in CarsalesCom on October 24, 2024 and sell it today you would earn a total of  933.00  from holding CarsalesCom or generate 69.27% return on investment over 90 days.

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

ENN Energy Holdings  vs.  CarsalesCom

ENN Energy Holdings

Risk-Adjusted Performance

5 of 100

Modest

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

CarsalesCom

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CarsalesCom are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Carsales 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 Carsales

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

The idea behind ENN Energy Holdings and CarsalesCom 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.