Correlation Between Enlight Renewable and Western Midstream

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

Diversification Opportunities for Enlight Renewable and Western Midstream

0.28

Correlation Coefficient

Enlight Renewable  Western Midstream

Modest diversification

The 3 months correlation between Enlight and Western is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Enlight Renewable Energy and Western Midstream Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Midstream 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 Western Midstream. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Midstream has no effect on the direction of Enlight Renewable i.e., Enlight Renewable and Western Midstream go up and down completely randomly.

Pair Corralation between Enlight Renewable and Western Midstream

Given the investment horizon of 90 days Enlight Renewable Energy is expected to generate 1.74 times more return on investment than Western Midstream. However, Enlight Renewable is 1.74 times more volatile than Western Midstream Partners. It trades about 0.05 of its potential returns per unit of risk. Western Midstream Partners is currently generating about 0.01 per unit of risk. If you would invest  1,515  in Enlight Renewable Energy on September 17, 2024 and sell it today you would earn a total of  98.00  from holding Enlight Renewable Energy or generate 6.47% return on investment over 90 days.

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

Enlight Renewable Energy  vs.  Western Midstream Partners

Enlight Renewable Energy

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Enlight Renewable Energy are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating essential indicators, Enlight Renewable may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Western Midstream

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Western Midstream Partners are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Western Midstream is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Enlight Renewable and Western Midstream

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

The idea behind Enlight Renewable Energy and Western Midstream Partners 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.