Correlation Between Enlight Renewable and Constellation Energy

Can any of the company-specific risk be diversified away by investing in both Enlight Renewable and Constellation Energy 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 Enlight Renewable and Constellation Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Enlight Renewable Energy and Constellation Energy Corp, you can compare the effects of market volatilities on Enlight Renewable and Constellation Energy 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 Enlight Renewable with a short position of Constellation Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enlight Renewable and Constellation Energy.

Diversification Opportunities for Enlight Renewable and Constellation Energy

-0.42

Correlation Coefficient

Enlight Renewable  Constellation Energy

Very good diversification

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

Pair Corralation between Enlight Renewable and Constellation Energy

Given the investment horizon of 90 days Enlight Renewable is expected to generate 1.08 times less return on investment than Constellation Energy. In addition to that, Enlight Renewable is 1.65 times more volatile than Constellation Energy Corp. It trades about 0.05 of its total potential returns per unit of risk. Constellation Energy Corp is currently generating about 0.09 per unit of volatility. If you would invest  19,198  in Constellation Energy Corp on February 7, 2024 and sell it today you would earn a total of  572.00  from holding Constellation Energy Corp or generate 2.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Enlight Renewable Energy  vs.  Constellation Energy Corp

Enlight Renewable Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Enlight Renewable Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, Enlight Renewable is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Constellation Energy Corp

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Constellation Energy Corp are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Constellation Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Enlight Renewable and Constellation Energy

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

The idea behind Enlight Renewable Energy and Constellation Energy Corp 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.