Correlation Between Entergy and Enel SpA

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

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

Diversification Opportunities for Entergy and Enel SpA

-0.61

Correlation Coefficient

Entergy  Enel SpA

Excellent diversification

The 3 months correlation between Entergy and Enel is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Entergy and Enel SpA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enel SpA and Entergy 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 Entergy are associated (or correlated) with Enel SpA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enel SpA has no effect on the direction of Entergy i.e., Entergy and Enel SpA go up and down completely randomly.

Pair Corralation between Entergy and Enel SpA

Assuming the 90 days horizon Entergy is expected to generate 1.51 times more return on investment than Enel SpA. However, Entergy is 1.51 times more volatile than Enel SpA. It trades about 0.16 of its potential returns per unit of risk. Enel SpA is currently generating about -0.01 per unit of risk. If you would invest  5,701  in Entergy on September 28, 2024 and sell it today you would earn a total of  1,449  from holding Entergy or generate 25.42% return on investment over 90 days.

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

Entergy  vs.  Enel SpA

Entergy

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Entergy are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Entergy reported solid returns over the last few months and may actually be approaching a breakup point.

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 nearly stable essential indicators, Enel SpA is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Entergy and Enel SpA

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

The idea behind Entergy and Enel SpA 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.