Correlation Between Compania and Enel Generacion
Can any of the company-specific risk be diversified away by investing in both Compania and Enel Generacion 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 Compania and Enel Generacion into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Compania de Transporte and Enel Generacion Costanera, you can compare the effects of market volatilities on Compania and Enel Generacion 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 Compania with a short position of Enel Generacion. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compania and Enel Generacion.
Diversification Opportunities for Compania and Enel Generacion
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Compania and Enel is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Compania de Transporte and Enel Generacion Costanera in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enel Generacion Costanera and Compania 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 Compania de Transporte are associated (or correlated) with Enel Generacion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enel Generacion Costanera has no effect on the direction of Compania i.e., Compania and Enel Generacion go up and down completely randomly.
Pair Corralation between Compania and Enel Generacion
Assuming the 90 days trading horizon Compania is expected to generate 3.08 times less return on investment than Enel Generacion. In addition to that, Compania is 1.05 times more volatile than Enel Generacion Costanera. It trades about 0.14 of its total potential returns per unit of risk. Enel Generacion Costanera is currently generating about 0.45 per unit of volatility. If you would invest 32,450 in Enel Generacion Costanera on September 1, 2024 and sell it today you would earn a total of 9,900 from holding Enel Generacion Costanera or generate 30.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Compania de Transporte vs. Enel Generacion Costanera
Performance |
| Timeline |
| Compania de Transporte |
| Enel Generacion Costanera |
Compania and Enel Generacion Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Compania and Enel Generacion
The main advantage of trading using opposite Compania and Enel Generacion positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compania position performs unexpectedly, Enel Generacion 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 Generacion will offset losses from the drop in Enel Generacion's long position.| Compania vs. Agrometal SAI | Compania vs. Harmony Gold Mining | Compania vs. Transportadora de Gas | Compania vs. United States Steel |
| Enel Generacion vs. Empresa Distribuidora Electrica | Enel Generacion vs. Longvie SA | Enel Generacion vs. American Express Co | Enel Generacion vs. United States Steel |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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