Correlation Between Sociedad Comercial and Enel Generacion

Can any of the company-specific risk be diversified away by investing in both Sociedad Comercial 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 Sociedad Comercial and Enel Generacion into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sociedad Comercial del and Enel Generacion Costanera, you can compare the effects of market volatilities on Sociedad Comercial 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 Sociedad Comercial with a short position of Enel Generacion. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sociedad Comercial and Enel Generacion.

Diversification Opportunities for Sociedad Comercial and Enel Generacion

-0.42

Correlation Coefficient

Sociedad Comercial  Enel Generacion

Very good diversification

The 3 months correlation between Sociedad and Enel is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Sociedad Comercial del 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 Sociedad Comercial 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 Sociedad Comercial del 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 Sociedad Comercial i.e., Sociedad Comercial and Enel Generacion go up and down completely randomly.

Pair Corralation between Sociedad Comercial and Enel Generacion

Assuming the 90 days trading horizon Sociedad Comercial del is expected to generate 1.91 times more return on investment than Enel Generacion. However, Sociedad Comercial is 1.91 times more volatile than Enel Generacion Costanera. It trades about 0.09 of its potential returns per unit of risk. Enel Generacion Costanera is currently generating about 0.07 per unit of risk. If you would invest  14,905  in Sociedad Comercial del on September 15, 2024 and sell it today you would earn a total of  9,645  from holding Sociedad Comercial del or generate 64.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.2%
Values	Daily Returns

Sociedad Comercial del  vs.  Enel Generacion Costanera

Sociedad Comercial del

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sociedad Comercial del has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Enel Generacion Costanera

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Enel Generacion Costanera are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Enel Generacion sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sociedad Comercial and Enel Generacion

The main advantage of trading using opposite Sociedad Comercial and Enel Generacion positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sociedad Comercial 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.

The idea behind Sociedad Comercial del and Enel Generacion Costanera 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.