Correlation Between Engie Energia and Enel Chile

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

Diversification Opportunities for Engie Energia and Enel Chile

0.36
  Correlation Coefficient

Weak diversification

The 3 months correlation between Engie and Enel is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Engie Energia Chile 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 Engie Energia 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 Engie Energia Chile 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 Engie Energia i.e., Engie Energia and Enel Chile go up and down completely randomly.

Pair Corralation between Engie Energia and Enel Chile

Assuming the 90 days trading horizon Engie Energia is expected to generate 10.11 times less return on investment than Enel Chile. But when comparing it to its historical volatility, Engie Energia Chile is 1.31 times less risky than Enel Chile. It trades about 0.02 of its potential returns per unit of risk. Enel Chile SA is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  5,500  in Enel Chile SA on September 20, 2024 and sell it today you would earn a total of  210.00  from holding Enel Chile SA or generate 3.82% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy95.65%
ValuesDaily Returns

Engie Energia Chile  vs.  Enel Chile SA

 Performance 
       Timeline  
Engie Energia Chile 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Engie Energia Chile are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy essential indicators, Engie Energia is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.
Enel Chile SA 

Risk-Adjusted Performance

16 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Enel Chile SA are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical indicators, Enel Chile demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Engie Energia and Enel Chile Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Engie Energia and Enel Chile

The main advantage of trading using opposite Engie Energia and Enel Chile positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Engie Energia 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 Engie Energia Chile 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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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.

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