Correlation Between Enel SpA and EDP Energias
Can any of the company-specific risk be diversified away by investing in both Enel SpA and EDP Energias 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 EDP Energias into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Enel SpA and EDP Energias de, you can compare the effects of market volatilities on Enel SpA and EDP Energias 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 EDP Energias. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enel SpA and EDP Energias.
Diversification Opportunities for Enel SpA and EDP Energias
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Enel and EDP is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Enel SpA and EDP Energias de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EDP Energias de 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 EDP Energias. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EDP Energias de has no effect on the direction of Enel SpA i.e., Enel SpA and EDP Energias go up and down completely randomly.
Pair Corralation between Enel SpA and EDP Energias
Assuming the 90 days horizon Enel SpA is expected to generate 0.95 times more return on investment than EDP Energias. However, Enel SpA is 1.06 times less risky than EDP Energias. It trades about -0.07 of its potential returns per unit of risk. EDP Energias de is currently generating about -0.27 per unit of risk. If you would invest 794.00 in Enel SpA on September 12, 2024 and sell it today you would lose (61.00) from holding Enel SpA or give up 7.68% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Enel SpA vs. EDP Energias de
Performance |
| Timeline |
| Enel SpA |
| EDP Energias de |
Enel SpA and EDP Energias Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Enel SpA and EDP Energias
The main advantage of trading using opposite Enel SpA and EDP Energias positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enel SpA position performs unexpectedly, EDP Energias 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 EDP Energias will offset losses from the drop in EDP Energias' long position.The idea behind Enel SpA and EDP Energias de 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.| EDP Energias vs. Atco | EDP Energias vs. Canadian Utilities Limited | EDP Energias vs. Engie SA ADR | EDP Energias vs. The AES |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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