Correlation Between Enel Chile and WEC Energy

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Can any of the company-specific risk be diversified away by investing in both Enel Chile and WEC 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 Enel Chile and WEC Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Enel Chile SA and WEC Energy Group, you can compare the effects of market volatilities on Enel Chile and WEC 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 Enel Chile with a short position of WEC Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enel Chile and WEC Energy.

Diversification Opportunities for Enel Chile and WEC Energy

0.75
  Correlation Coefficient

Poor diversification

The 3 months correlation between Enel and WEC is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Enel Chile SA and WEC Energy Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WEC Energy Group and Enel Chile 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 Enel Chile SA are associated (or correlated) with WEC Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WEC Energy Group has no effect on the direction of Enel Chile i.e., Enel Chile and WEC Energy go up and down completely randomly.

Pair Corralation between Enel Chile and WEC Energy

Assuming the 90 days horizon Enel Chile SA is expected to generate 1.42 times more return on investment than WEC Energy. However, Enel Chile is 1.42 times more volatile than WEC Energy Group. It trades about 0.25 of its potential returns per unit of risk. WEC Energy Group is currently generating about 0.0 per unit of risk. If you would invest  250.00  in Enel Chile SA on September 13, 2024 and sell it today you would earn a total of  22.00  from holding Enel Chile SA or generate 8.8% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Enel Chile SA  vs.  WEC Energy Group

 Performance 
       Timeline  
Enel Chile SA 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Enel Chile SA are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Enel Chile reported solid returns over the last few months and may actually be approaching a breakup point.
WEC Energy Group 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in WEC Energy Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, WEC Energy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Enel Chile and WEC Energy Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Enel Chile and WEC Energy

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

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