Correlation Between CMS Energy and Enel Chile

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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

0.56
  Correlation Coefficient

Very weak diversification

The 3 months correlation between CMS and Enel is 0.56. 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 horizon CMS Energy is expected to generate 0.71 times more return on investment than Enel Chile. However, CMS Energy is 1.42 times less risky than Enel Chile. It trades about 0.11 of its potential returns per unit of risk. Enel Chile SA is currently generating about 0.01 per unit of risk. If you would invest  6,200  in CMS Energy on September 12, 2024 and sell it today you would earn a total of  150.00  from holding CMS Energy or generate 2.42% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy95.65%
ValuesDaily Returns

CMS Energy  vs.  Enel Chile SA

 Performance 
       Timeline  
CMS Energy 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in CMS Energy are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, CMS Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.
Enel Chile SA 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Enel Chile SA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Enel Chile may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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.
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The idea behind CMS Energy and Enel Chile SA 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 Commodity Directory module to find actively traded commodities issued by global exchanges.

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