Correlation Between Enlight Renewable and OPC Energy

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

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

Diversification Opportunities for Enlight Renewable and OPC Energy

-0.07

Correlation Coefficient

Enlight Renewable  OPC Energy

Good diversification

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

Pair Corralation between Enlight Renewable and OPC Energy

Assuming the 90 days trading horizon Enlight Renewable Energy is expected to under-perform the OPC Energy. But the stock apears to be less risky and, when comparing its historical volatility, Enlight Renewable Energy is 1.78 times less risky than OPC Energy. The stock trades about -0.19 of its potential returns per unit of risk. The OPC Energy is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  306,000  in OPC Energy on September 17, 2024 and sell it today you would lose (5,200) from holding OPC Energy or give up 1.7% of portfolio value over 90 days.

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

Enlight Renewable Energy  vs.  OPC Energy

Enlight Renewable Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Enlight Renewable Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Enlight Renewable is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

OPC Energy

Risk-Adjusted Performance

7 of 100

Modest

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

Pair Trading with Enlight Renewable and OPC Energy

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

The idea behind Enlight Renewable Energy and OPC Energy 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.