Correlation Between Enel Generacion and Wells Fargo
Can any of the company-specific risk be diversified away by investing in both Enel Generacion and Wells Fargo 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 Generacion and Wells Fargo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Enel Generacion Costanera and Wells Fargo, you can compare the effects of market volatilities on Enel Generacion and Wells Fargo 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 Generacion with a short position of Wells Fargo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enel Generacion and Wells Fargo.
Diversification Opportunities for Enel Generacion and Wells Fargo
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Enel and Wells is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Enel Generacion Costanera and Wells Fargo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wells Fargo and Enel Generacion 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 Generacion Costanera are associated (or correlated) with Wells Fargo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wells Fargo has no effect on the direction of Enel Generacion i.e., Enel Generacion and Wells Fargo go up and down completely randomly.
Pair Corralation between Enel Generacion and Wells Fargo
Assuming the 90 days trading horizon Enel Generacion is expected to generate 1.41 times less return on investment than Wells Fargo. In addition to that, Enel Generacion is 1.24 times more volatile than Wells Fargo. It trades about 0.04 of its total potential returns per unit of risk. Wells Fargo is currently generating about 0.06 per unit of volatility. If you would invest 1,483,450 in Wells Fargo on September 1, 2024 and sell it today you would earn a total of 236,550 from holding Wells Fargo or generate 15.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.2% |
| Values | Daily Returns |
Enel Generacion Costanera vs. Wells Fargo
Performance |
| Timeline |
| Enel Generacion Costanera |
| Wells Fargo |
Enel Generacion and Wells Fargo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Enel Generacion and Wells Fargo
The main advantage of trading using opposite Enel Generacion and Wells Fargo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enel Generacion position performs unexpectedly, Wells Fargo 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 Wells Fargo will offset losses from the drop in Wells Fargo's long position.| Enel Generacion vs. Empresa Distribuidora Electrica | Enel Generacion vs. Longvie SA | Enel Generacion vs. American Express Co | Enel Generacion vs. United States Steel |
| Wells Fargo vs. Harmony Gold Mining | Wells Fargo vs. United States Steel | Wells Fargo vs. Agrometal SAI | Wells Fargo vs. Telecom Argentina |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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