Correlation Between Enel Chile and Vapores

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

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

Diversification Opportunities for Enel Chile and Vapores

-0.07

Correlation Coefficient

Enel Chile  Vapores

Good diversification

The 3 months correlation between Enel and Vapores is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Enel Chile SA and Vapores in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vapores and Enel Chile 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 Chile SA are associated (or correlated) with Vapores. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vapores has no effect on the direction of Enel Chile i.e., Enel Chile and Vapores go up and down completely randomly.

Pair Corralation between Enel Chile and Vapores

Assuming the 90 days trading horizon Enel Chile SA is expected to generate 0.93 times more return on investment than Vapores. However, Enel Chile SA is 1.08 times less risky than Vapores. It trades about 0.09 of its potential returns per unit of risk. Vapores is currently generating about -0.06 per unit of risk. If you would invest  4,951  in Enel Chile SA on September 3, 2024 and sell it today you would earn a total of  409.00  from holding Enel Chile SA or generate 8.26% return on investment over 90 days.

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

Enel Chile SA  vs.  Vapores

Enel Chile SA

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Enel Chile SA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical indicators, Enel Chile may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Vapores

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vapores 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 stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Enel Chile and Vapores

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

The idea behind Enel Chile SA and Vapores 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..