Correlation Between WIG 30 and Enea SA

Can any of the company-specific risk be diversified away by investing in both WIG 30 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 WIG 30 and Enea SA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between WIG 30 and Enea SA, you can compare the effects of market volatilities on WIG 30 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 WIG 30 with a short position of Enea SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of WIG 30 and Enea SA.

Diversification Opportunities for WIG 30 and Enea SA

-0.25

Correlation Coefficient

WIG 30  Enea SA

Very good diversification

The 3 months correlation between WIG and Enea is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding WIG 30 and Enea SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enea SA and WIG 30 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 WIG 30 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 WIG 30 i.e., WIG 30 and Enea SA go up and down completely randomly.

Pair Corralation between WIG 30 and Enea SA

Assuming the 90 days trading horizon WIG 30 is expected to generate 2.66 times less return on investment than Enea SA. But when comparing it to its historical volatility, WIG 30 is 2.19 times less risky than Enea SA. It trades about 0.05 of its potential returns per unit of risk. 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	Insignificant
Accuracy	100.0%
Values	Daily Returns

WIG 30  vs.  Enea SA

Pair Trading with WIG 30 and Enea SA

The main advantage of trading using opposite WIG 30 and Enea SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WIG 30 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 WIG 30 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.