Correlation Between Enel Chile and GE Vernova

Can any of the company-specific risk be diversified away by investing in both Enel Chile and GE Vernova 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 GE Vernova 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 GE Vernova LLC, you can compare the effects of market volatilities on Enel Chile and GE Vernova 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 GE Vernova. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enel Chile and GE Vernova.

Diversification Opportunities for Enel Chile and GE Vernova

0.42

Correlation Coefficient

Enel Chile  GE Vernova

Very weak diversification

The 3 months correlation between Enel and GEV is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Enel Chile SA and GE Vernova LLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GE Vernova LLC 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 GE Vernova. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GE Vernova LLC has no effect on the direction of Enel Chile i.e., Enel Chile and GE Vernova go up and down completely randomly.

Pair Corralation between Enel Chile and GE Vernova

Given the investment horizon of 90 days Enel Chile SA is expected to under-perform the GE Vernova. But the stock apears to be less risky and, when comparing its historical volatility, Enel Chile SA is 1.63 times less risky than GE Vernova. The stock trades about -0.01 of its potential returns per unit of risk. The GE Vernova LLC is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  13,125  in GE Vernova LLC on September 14, 2024 and sell it today you would earn a total of  20,057  from holding GE Vernova LLC or generate 152.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	73.09%
Values	Daily Returns

Enel Chile SA  vs.  GE Vernova LLC

Enel Chile SA

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Enel Chile SA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound forward indicators, Enel Chile is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

GE Vernova LLC

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in GE Vernova LLC are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal technical and fundamental indicators, GE Vernova showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Enel Chile and GE Vernova

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

The idea behind Enel Chile SA and GE Vernova LLC 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.