Correlation Between Enel Chile and Southern

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

Diversification Opportunities for Enel Chile and Southern

-0.45

Correlation Coefficient

Enel Chile  Southern

Very good diversification

The 3 months correlation between Enel and Southern is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Enel Chile SA and Southern Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern 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 Southern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern has no effect on the direction of Enel Chile i.e., Enel Chile and Southern go up and down completely randomly.

Pair Corralation between Enel Chile and Southern

Given the investment horizon of 90 days Enel Chile SA is expected to generate 1.68 times more return on investment than Southern. However, Enel Chile is 1.68 times more volatile than Southern Company. It trades about 0.06 of its potential returns per unit of risk. Southern Company is currently generating about -0.1 per unit of risk. If you would invest  279.00  in Enel Chile SA on September 29, 2024 and sell it today you would earn a total of  15.00  from holding Enel Chile SA or generate 5.38% return on investment over 90 days.

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

Enel Chile SA  vs.  Southern Company

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.

Southern

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Southern Company has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Enel Chile and Southern

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

The idea behind Enel Chile SA and Southern Company 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.