Correlation Between Aguas Andinas and Enel Transmission

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

Diversification Opportunities for Aguas Andinas and Enel Transmission

0.0
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Aguas and Enel is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Aguas Andinas SA and Enel Transmission Chile in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enel Transmission Chile and Aguas Andinas 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 Aguas Andinas SA are associated (or correlated) with Enel Transmission. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enel Transmission Chile has no effect on the direction of Aguas Andinas i.e., Aguas Andinas and Enel Transmission go up and down completely randomly.

Pair Corralation between Aguas Andinas and Enel Transmission

If you would invest  28,800  in Aguas Andinas SA on August 28, 2024 and sell it today you would earn a total of  1,656  from holding Aguas Andinas SA or generate 5.75% return on investment over 90 days.
Time Period3 Months [change]
DirectionFlat 
StrengthInsignificant
Accuracy0.0%
ValuesDaily Returns

Aguas Andinas SA  vs.  Enel Transmission Chile

 Performance 
       Timeline  
Aguas Andinas SA 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Aguas Andinas SA are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Aguas Andinas may actually be approaching a critical reversion point that can send shares even higher in December 2024.
Enel Transmission Chile 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Enel Transmission Chile has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong primary indicators, Enel Transmission is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Aguas Andinas and Enel Transmission Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Aguas Andinas and Enel Transmission

The main advantage of trading using opposite Aguas Andinas and Enel Transmission positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aguas Andinas position performs unexpectedly, Enel Transmission 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 Transmission will offset losses from the drop in Enel Transmission's long position.
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The idea behind Aguas Andinas SA and Enel Transmission Chile 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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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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.

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