Correlation Between Pepco Group and Enea SA

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

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

Diversification Opportunities for Pepco Group and Enea SA

-0.42

Correlation Coefficient

Pepco Group  Enea SA

Very good diversification

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

Pair Corralation between Pepco Group and Enea SA

Assuming the 90 days trading horizon Pepco Group BV is expected to under-perform the Enea SA. But the stock apears to be less risky and, when comparing its historical volatility, Pepco Group BV is 1.04 times less risky than Enea SA. The stock trades about -0.05 of its potential returns per unit of risk. The Enea SA is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  560.00  in Enea SA on September 14, 2024 and sell it today you would earn a total of  589.00  from holding Enea SA or generate 105.18% return on investment over 90 days.

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

Pepco Group BV  vs.  Enea SA

Pepco Group BV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pepco Group BV has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Pepco Group is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Enea SA

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Enea SA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Enea SA may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Pepco Group and Enea SA

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

The idea behind Pepco Group BV and Enea 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.