Correlation Between CMS Energy and Enel Chile
Can any of the company-specific risk be diversified away by investing in both CMS Energy and Enel Chile 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 CMS Energy and Enel Chile into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CMS Energy and Enel Chile SA, you can compare the effects of market volatilities on CMS Energy and Enel Chile 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 CMS Energy with a short position of Enel Chile. Check out your portfolio center. Please also check ongoing floating volatility patterns of CMS Energy and Enel Chile.
Diversification Opportunities for CMS Energy and Enel Chile
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between CMS and Enel is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding CMS Energy and Enel Chile SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enel Chile SA and CMS 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 CMS Energy are associated (or correlated) with Enel Chile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enel Chile SA has no effect on the direction of CMS Energy i.e., CMS Energy and Enel Chile go up and down completely randomly.
Pair Corralation between CMS Energy and Enel Chile
Assuming the 90 days trading horizon CMS Energy is expected to generate 2.19 times less return on investment than Enel Chile. But when comparing it to its historical volatility, CMS Energy is 1.65 times less risky than Enel Chile. It trades about 0.04 of its potential returns per unit of risk. Enel Chile SA is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 179.00 in Enel Chile SA on August 30, 2024 and sell it today you would earn a total of 90.00 from holding Enel Chile SA or generate 50.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CMS Energy vs. Enel Chile SA
Performance |
| Timeline |
| CMS Energy |
| Enel Chile SA |
CMS Energy and Enel Chile Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CMS Energy and Enel Chile
The main advantage of trading using opposite CMS Energy and Enel Chile positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CMS Energy position performs unexpectedly, Enel Chile 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 Chile will offset losses from the drop in Enel Chile's long position.| CMS Energy vs. Entergy Texas | CMS Energy vs. Duke Energy | CMS Energy vs. Spire Inc | CMS Energy vs. Consumers Energy |
| Enel Chile vs. Centrais Eltricas Brasileiras | Enel Chile vs. Korea Electric Power | Enel Chile vs. Central Puerto SA | Enel Chile vs. CMS Energy |
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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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