Correlation Between NorthWestern and Enel SpA
Can any of the company-specific risk be diversified away by investing in both NorthWestern and Enel SpA 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 NorthWestern and Enel SpA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NorthWestern and Enel SpA, you can compare the effects of market volatilities on NorthWestern and Enel SpA 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 NorthWestern with a short position of Enel SpA. Check out your portfolio center. Please also check ongoing floating volatility patterns of NorthWestern and Enel SpA.
Diversification Opportunities for NorthWestern and Enel SpA
0.19 | Correlation Coefficient |
Average diversification
The 3 months correlation between NorthWestern and Enel is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding NorthWestern and Enel SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enel SpA and NorthWestern 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 NorthWestern are associated (or correlated) with Enel SpA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enel SpA has no effect on the direction of NorthWestern i.e., NorthWestern and Enel SpA go up and down completely randomly.
Pair Corralation between NorthWestern and Enel SpA
Considering the 90-day investment horizon NorthWestern is expected to generate 0.64 times more return on investment than Enel SpA. However, NorthWestern is 1.57 times less risky than Enel SpA. It trades about 0.05 of its potential returns per unit of risk. Enel SpA is currently generating about 0.01 per unit of risk. If you would invest 5,069 in NorthWestern on August 29, 2024 and sell it today you would earn a total of 379.00 from holding NorthWestern or generate 7.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NorthWestern vs. Enel SpA
Performance |
| Timeline |
| NorthWestern |
| Enel SpA |
NorthWestern and Enel SpA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NorthWestern and Enel SpA
The main advantage of trading using opposite NorthWestern and Enel SpA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NorthWestern position performs unexpectedly, Enel SpA 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 SpA will offset losses from the drop in Enel SpA's long position.| NorthWestern vs. Allete Inc | NorthWestern vs. Black Hills | NorthWestern vs. Otter Tail | NorthWestern vs. Avista |
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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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