Correlation Between ENCE Energa and CIE Automotive
Can any of the company-specific risk be diversified away by investing in both ENCE Energa and CIE Automotive 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 ENCE Energa and CIE Automotive into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ENCE Energa y and CIE Automotive SA, you can compare the effects of market volatilities on ENCE Energa and CIE Automotive 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 ENCE Energa with a short position of CIE Automotive. Check out your portfolio center. Please also check ongoing floating volatility patterns of ENCE Energa and CIE Automotive.
Diversification Opportunities for ENCE Energa and CIE Automotive
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ENCE and CIE is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding ENCE Energa y and CIE Automotive SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CIE Automotive SA and ENCE Energa 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 ENCE Energa y are associated (or correlated) with CIE Automotive. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CIE Automotive SA has no effect on the direction of ENCE Energa i.e., ENCE Energa and CIE Automotive go up and down completely randomly.
Pair Corralation between ENCE Energa and CIE Automotive
Assuming the 90 days trading horizon ENCE Energa y is expected to under-perform the CIE Automotive. In addition to that, ENCE Energa is 1.31 times more volatile than CIE Automotive SA. It trades about -0.06 of its total potential returns per unit of risk. CIE Automotive SA is currently generating about -0.05 per unit of volatility. If you would invest 2,761 in CIE Automotive SA on August 28, 2024 and sell it today you would lose (216.00) from holding CIE Automotive SA or give up 7.82% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ENCE Energa y vs. CIE Automotive SA
Performance |
| Timeline |
| ENCE Energa y |
| CIE Automotive SA |
ENCE Energa and CIE Automotive Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ENCE Energa and CIE Automotive
The main advantage of trading using opposite ENCE Energa and CIE Automotive positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ENCE Energa position performs unexpectedly, CIE Automotive 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 CIE Automotive will offset losses from the drop in CIE Automotive's long position.| ENCE Energa vs. ACS Actividades de | ENCE Energa vs. ArcelorMittal SA | ENCE Energa vs. Mapfre | ENCE Energa vs. Ferrovial |
| CIE Automotive vs. Viscofan | CIE Automotive vs. Gestamp Automocion SA | CIE Automotive vs. ENCE Energa y | CIE Automotive vs. Acerinox |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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