Correlation Between Enel Amricas and Colbun

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

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

Diversification Opportunities for Enel Amricas and Colbun

0.46

Correlation Coefficient

Enel Amricas  Colbun

Very weak diversification

The 3 months correlation between Enel and Colbun is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Enel Amricas SA and Colbun in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Colbun and Enel Amricas 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 Enel Amricas SA are associated (or correlated) with Colbun. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Colbun has no effect on the direction of Enel Amricas i.e., Enel Amricas and Colbun go up and down completely randomly.

Pair Corralation between Enel Amricas and Colbun

Assuming the 90 days trading horizon Enel Amricas SA is expected to under-perform the Colbun. In addition to that, Enel Amricas is 1.11 times more volatile than Colbun. It trades about -0.1 of its total potential returns per unit of risk. Colbun is currently generating about 0.05 per unit of volatility. If you would invest  12,008  in Colbun on September 3, 2024 and sell it today you would earn a total of  290.00  from holding Colbun or generate 2.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Enel Amricas SA  vs.  Colbun

Enel Amricas SA

Risk-Adjusted Performance

0 of 100

Very Weak

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

Colbun

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Colbun are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong essential indicators, Colbun is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Enel Amricas and Colbun

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

The idea behind Enel Amricas SA and Colbun 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.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.