Correlation Between GE Vernova and Enel Chile

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

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

Diversification Opportunities for GE Vernova and Enel Chile

0.42

Correlation Coefficient

GE Vernova  Enel Chile

Very weak diversification

The 3 months correlation between GEV and Enel is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding GE Vernova LLC and Enel Chile SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enel Chile SA and GE Vernova 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 GE Vernova LLC are associated (or correlated) with Enel Chile. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enel Chile SA has no effect on the direction of GE Vernova i.e., GE Vernova and Enel Chile go up and down completely randomly.

Pair Corralation between GE Vernova and Enel Chile

Considering the 90-day investment horizon GE Vernova LLC is expected to generate 1.63 times more return on investment than Enel Chile. However, GE Vernova is 1.63 times more volatile than Enel Chile SA. It trades about 0.18 of its potential returns per unit of risk. Enel Chile SA is currently generating about -0.01 per unit of risk. If you would invest  13,125  in GE Vernova LLC on September 14, 2024 and sell it today you would earn a total of  20,057  from holding GE Vernova LLC or generate 152.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	73.09%
Values	Daily Returns

GE Vernova LLC  vs.  Enel Chile SA

GE Vernova LLC

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in GE Vernova LLC are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal technical and fundamental indicators, GE Vernova showed solid returns over the last few months and may actually be approaching a breakup point.

Enel Chile SA

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Enel Chile SA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound forward indicators, Enel Chile is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with GE Vernova and Enel Chile

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

The idea behind GE Vernova LLC and Enel Chile SA 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.