Correlation Between Energia Latina and SMU SA
Can any of the company-specific risk be diversified away by investing in both Energia Latina and SMU SA 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 Energia Latina and SMU SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Energia Latina SA and SMU SA, you can compare the effects of market volatilities on Energia Latina and SMU SA 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 Energia Latina with a short position of SMU SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energia Latina and SMU SA.
Diversification Opportunities for Energia Latina and SMU SA
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Energia and SMU is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Energia Latina SA and SMU SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SMU SA and Energia Latina 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 Energia Latina SA are associated (or correlated) with SMU SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SMU SA has no effect on the direction of Energia Latina i.e., Energia Latina and SMU SA go up and down completely randomly.
Pair Corralation between Energia Latina and SMU SA
Assuming the 90 days trading horizon Energia Latina SA is expected to generate 0.97 times more return on investment than SMU SA. However, Energia Latina SA is 1.03 times less risky than SMU SA. It trades about 0.08 of its potential returns per unit of risk. SMU SA is currently generating about 0.05 per unit of risk. If you would invest 80,001 in Energia Latina SA on September 2, 2024 and sell it today you would earn a total of 13,499 from holding Energia Latina SA or generate 16.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 48.08% |
| Values | Daily Returns |
Energia Latina SA vs. SMU SA
Performance |
| Timeline |
| Energia Latina SA |
| SMU SA |
Energia Latina and SMU SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Energia Latina and SMU SA
The main advantage of trading using opposite Energia Latina and SMU SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Energia Latina position performs unexpectedly, SMU SA 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 SMU SA will offset losses from the drop in SMU SA's long position.| Energia Latina vs. Aguas Andinas SA | Energia Latina vs. Parq Arauco | Energia Latina vs. Enel Generacin Chile | Energia Latina vs. Sociedad Matriz SAAM |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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