Correlation Between Enel SpA and PacifiCorp

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

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

Diversification Opportunities for Enel SpA and PacifiCorp

-0.86

Correlation Coefficient

Enel SpA  PacifiCorp

Pay attention - limited upside

The 3 months correlation between Enel and PacifiCorp is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Enel SpA and PacifiCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PacifiCorp and Enel SpA 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 SpA are associated (or correlated) with PacifiCorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PacifiCorp has no effect on the direction of Enel SpA i.e., Enel SpA and PacifiCorp go up and down completely randomly.

Pair Corralation between Enel SpA and PacifiCorp

Assuming the 90 days horizon Enel SpA is expected to under-perform the PacifiCorp. But the pink sheet apears to be less risky and, when comparing its historical volatility, Enel SpA is 3.56 times less risky than PacifiCorp. The pink sheet trades about -0.07 of its potential returns per unit of risk. The PacifiCorp is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  10,500  in PacifiCorp on September 13, 2024 and sell it today you would earn a total of  2,995  from holding PacifiCorp or generate 28.52% return on investment over 90 days.

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

Enel SpA  vs.  PacifiCorp

Enel SpA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Enel SpA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

PacifiCorp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PacifiCorp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very weak essential indicators, PacifiCorp displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Enel SpA and PacifiCorp

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

The idea behind Enel SpA and PacifiCorp 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.