Correlation Between Wells Fargo and Enel Generacion
Can any of the company-specific risk be diversified away by investing in both Wells Fargo 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 Wells Fargo and Enel Generacion into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wells Fargo and Enel Generacion Costanera, you can compare the effects of market volatilities on Wells Fargo 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 Wells Fargo with a short position of Enel Generacion. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wells Fargo and Enel Generacion.
Diversification Opportunities for Wells Fargo and Enel Generacion
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Wells and Enel is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Wells Fargo 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 Wells Fargo 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 Wells Fargo 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 Wells Fargo i.e., Wells Fargo and Enel Generacion go up and down completely randomly.
Pair Corralation between Wells Fargo and Enel Generacion
Assuming the 90 days trading horizon Wells Fargo is expected to generate 0.69 times more return on investment than Enel Generacion. However, Wells Fargo is 1.45 times less risky than Enel Generacion. It trades about 0.15 of its potential returns per unit of risk. Enel Generacion Costanera is currently generating about 0.1 per unit of risk. If you would invest 284,400 in Wells Fargo on August 30, 2024 and sell it today you would earn a total of 1,410,600 from holding Wells Fargo or generate 495.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wells Fargo vs. Enel Generacion Costanera
Performance |
| Timeline |
| Wells Fargo |
| Enel Generacion Costanera |
Wells Fargo and Enel Generacion Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wells Fargo and Enel Generacion
The main advantage of trading using opposite Wells Fargo and Enel Generacion positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wells Fargo 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.| Wells Fargo vs. Transportadora de Gas | Wells Fargo vs. Agrometal SAI | Wells Fargo vs. Compania de Transporte | Wells Fargo vs. Harmony Gold Mining |
| Enel Generacion vs. Compania de Transporte | Enel Generacion vs. Transportadora de Gas | Enel Generacion vs. Harmony Gold Mining | Enel Generacion vs. Agrometal SAI |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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