Correlation Between Enel Chile and Direxion Daily

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

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

Diversification Opportunities for Enel Chile and Direxion Daily

0.41

Correlation Coefficient

Enel Chile  Direxion Daily

Very weak diversification

The 3 months correlation between Enel and Direxion is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Enel Chile SA and Direxion Daily Regional in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Daily Regional and Enel Chile 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 Enel Chile SA are associated (or correlated) with Direxion Daily. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direxion Daily Regional has no effect on the direction of Enel Chile i.e., Enel Chile and Direxion Daily go up and down completely randomly.

Pair Corralation between Enel Chile and Direxion Daily

Given the investment horizon of 90 days Enel Chile SA is expected to generate 0.38 times more return on investment than Direxion Daily. However, Enel Chile SA is 2.64 times less risky than Direxion Daily. It trades about 0.07 of its potential returns per unit of risk. Direxion Daily Regional is currently generating about 0.0 per unit of risk. If you would invest  139.00  in Enel Chile SA on July 20, 2024 and sell it today you would earn a total of  142.00  from holding Enel Chile SA or generate 102.16% return on investment over 90 days.

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

Enel Chile SA  vs.  Direxion Daily Regional

Enel Chile SA

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Enel Chile SA has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Direxion Daily Regional

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Direxion Daily Regional are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, Direxion Daily unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Enel Chile and Direxion Daily

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

The idea behind Enel Chile SA and Direxion Daily Regional 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.