Correlation Between Enlight Renewable and WEC Energy

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

Diversification Opportunities for Enlight Renewable and WEC Energy

0.39

Correlation Coefficient

Enlight Renewable  WEC Energy

Weak diversification

The 3 months correlation between Enlight and WEC is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Enlight Renewable Energy and WEC Energy Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WEC Energy Group 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 WEC Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WEC Energy Group has no effect on the direction of Enlight Renewable i.e., Enlight Renewable and WEC Energy go up and down completely randomly.

Pair Corralation between Enlight Renewable and WEC Energy

Given the investment horizon of 90 days Enlight Renewable Energy is expected to generate 2.8 times more return on investment than WEC Energy. However, Enlight Renewable is 2.8 times more volatile than WEC Energy Group. It trades about 0.01 of its potential returns per unit of risk. WEC Energy Group is currently generating about 0.01 per unit of risk. If you would invest  1,596  in Enlight Renewable Energy on September 24, 2024 and sell it today you would lose (15.00) from holding Enlight Renewable Energy or give up 0.94% of portfolio value over 90 days.

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

Enlight Renewable Energy  vs.  WEC Energy Group

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. In spite of comparatively stable essential indicators, Enlight Renewable is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

WEC Energy Group

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days WEC Energy Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, WEC Energy is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Enlight Renewable and WEC Energy

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

The idea behind Enlight Renewable Energy and WEC Energy Group 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.