Correlation Between Instituto Rosenbusch and Enel Generacion

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

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

Diversification Opportunities for Instituto Rosenbusch and Enel Generacion

0.51

Correlation Coefficient

Instituto Rosenbusch  Enel Generacion

Very weak diversification

The 3 months correlation between Instituto and Enel is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Instituto Rosenbusch SA and Enel Generacion Costanera in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enel Generacion Costanera and Instituto Rosenbusch 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 Instituto Rosenbusch SA are associated (or correlated) with Enel Generacion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enel Generacion Costanera has no effect on the direction of Instituto Rosenbusch i.e., Instituto Rosenbusch and Enel Generacion go up and down completely randomly.

Pair Corralation between Instituto Rosenbusch and Enel Generacion

Assuming the 90 days trading horizon Instituto Rosenbusch is expected to generate 1.67 times less return on investment than Enel Generacion. In addition to that, Instituto Rosenbusch is 1.75 times more volatile than Enel Generacion Costanera. It trades about 0.08 of its total potential returns per unit of risk. Enel Generacion Costanera is currently generating about 0.23 per unit of volatility. If you would invest  33,950  in Enel Generacion Costanera on September 15, 2024 and sell it today you would earn a total of  13,750  from holding Enel Generacion Costanera or generate 40.5% return on investment over 90 days.

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

Instituto Rosenbusch SA  vs.  Enel Generacion Costanera

Instituto Rosenbusch

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Instituto Rosenbusch SA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Instituto Rosenbusch sustained solid returns over the last few months and may actually be approaching a breakup point.

Enel Generacion Costanera

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Enel Generacion Costanera are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, Enel Generacion sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Instituto Rosenbusch and Enel Generacion

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

The idea behind Instituto Rosenbusch SA and Enel Generacion Costanera 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.