Correlation Between Electricite and ENEL Societa

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

By analyzing existing cross correlation between Electricite De France and ENEL Societa per, you can compare the effects of market volatilities on Electricite and ENEL Societa 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 Electricite with a short position of ENEL Societa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Electricite and ENEL Societa.

Diversification Opportunities for Electricite and ENEL Societa

-0.08

Correlation Coefficient

Electricite  ENEL Societa

Good diversification

The 3 months correlation between Electricite and ENEL is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Electricite De France and ENEL Societa per in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ENEL Societa per and Electricite 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 Electricite De France are associated (or correlated) with ENEL Societa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ENEL Societa per has no effect on the direction of Electricite i.e., Electricite and ENEL Societa go up and down completely randomly.

Pair Corralation between Electricite and ENEL Societa

If you would invest  702.00  in ENEL Societa per on September 5, 2024 and sell it today you would earn a total of  10.00  from holding ENEL Societa per or generate 1.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	0.81%
Values	Daily Returns

Electricite De France  vs.  ENEL Societa per

Electricite De France

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Electricite De France has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Electricite is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

ENEL Societa per

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ENEL Societa per has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of 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.

Pair Trading with Electricite and ENEL Societa

The main advantage of trading using opposite Electricite and ENEL Societa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Electricite position performs unexpectedly, ENEL Societa 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 Societa will offset losses from the drop in ENEL Societa's long position.

The idea behind Electricite De France and ENEL Societa per 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.