Correlation Between DAX Index and Enel Chile

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

Diversification Opportunities for DAX Index and Enel Chile

0.56
  Correlation Coefficient

Very weak diversification

The 3 months correlation between DAX and Enel is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding DAX Index 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 DAX Index 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 DAX Index 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 DAX Index i.e., DAX Index and Enel Chile go up and down completely randomly.
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Pair Corralation between DAX Index and Enel Chile

Assuming the 90 days trading horizon DAX Index is expected to generate 1.59 times less return on investment than Enel Chile. But when comparing it to its historical volatility, DAX Index is 2.63 times less risky than Enel Chile. It trades about 0.17 of its potential returns per unit of risk. Enel Chile SA is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  236.00  in Enel Chile SA on September 13, 2024 and sell it today you would earn a total of  32.00  from holding Enel Chile SA or generate 13.56% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

DAX Index  vs.  Enel Chile SA

 Performance 
       Timeline  

DAX Index and Enel Chile Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with DAX Index and Enel Chile

The main advantage of trading using opposite DAX Index and Enel Chile positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DAX Index 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 DAX Index 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.

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