Correlation Between Enel SpA and Allete
Can any of the company-specific risk be diversified away by investing in both Enel SpA and Allete 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 Enel SpA and Allete into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Enel SpA and Allete Inc, you can compare the effects of market volatilities on Enel SpA and Allete 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 Enel SpA with a short position of Allete. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enel SpA and Allete.
Diversification Opportunities for Enel SpA and Allete
Pay attention - limited upside
The 3 months correlation between Enel and Allete is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Enel SpA and Allete Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allete Inc and Enel SpA 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 Enel SpA are associated (or correlated) with Allete. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allete Inc has no effect on the direction of Enel SpA i.e., Enel SpA and Allete go up and down completely randomly.
Pair Corralation between Enel SpA and Allete
Assuming the 90 days horizon Enel SpA is expected to generate 1.91 times more return on investment than Allete. However, Enel SpA is 1.91 times more volatile than Allete Inc. It trades about 0.05 of its potential returns per unit of risk. Allete Inc is currently generating about 0.02 per unit of risk. If you would invest 481.00 in Enel SpA on September 3, 2024 and sell it today you would earn a total of 238.00 from holding Enel SpA or generate 49.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 98.38% |
| Values | Daily Returns |
Enel SpA vs. Allete Inc
Performance |
| Timeline |
| Enel SpA |
| Allete Inc |
Enel SpA and Allete Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Enel SpA and Allete
The main advantage of trading using opposite Enel SpA and Allete positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enel SpA position performs unexpectedly, Allete 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 Allete will offset losses from the drop in Allete's long position.The idea behind Enel SpA and Allete Inc 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.| Allete vs. Avista | Allete vs. Black Hills | Allete vs. Montauk Renewables | Allete vs. Companhia Paranaense de |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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