Correlation Between POLENERGIA and WILLIS LEASE

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

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

Diversification Opportunities for POLENERGIA and WILLIS LEASE

-0.06

Correlation Coefficient

POLENERGIA  WILLIS LEASE

Good diversification

The 3 months correlation between POLENERGIA and WILLIS is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding POLENERGIA SA ZY and WILLIS LEASE FIN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WILLIS LEASE FIN and POLENERGIA 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 POLENERGIA SA ZY are associated (or correlated) with WILLIS LEASE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WILLIS LEASE FIN has no effect on the direction of POLENERGIA i.e., POLENERGIA and WILLIS LEASE go up and down completely randomly.

Pair Corralation between POLENERGIA and WILLIS LEASE

Assuming the 90 days horizon POLENERGIA SA ZY is expected to under-perform the WILLIS LEASE. But the stock apears to be less risky and, when comparing its historical volatility, POLENERGIA SA ZY is 2.56 times less risky than WILLIS LEASE. The stock trades about 0.0 of its potential returns per unit of risk. The WILLIS LEASE FIN is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  14,882  in WILLIS LEASE FIN on October 10, 2024 and sell it today you would earn a total of  5,518  from holding WILLIS LEASE FIN or generate 37.08% return on investment over 90 days.

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

POLENERGIA SA ZY  vs.  WILLIS LEASE FIN

POLENERGIA SA ZY

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days POLENERGIA SA ZY has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, POLENERGIA is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

WILLIS LEASE FIN

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WILLIS LEASE FIN are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, WILLIS LEASE reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with POLENERGIA and WILLIS LEASE

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

The idea behind POLENERGIA SA ZY and WILLIS LEASE FIN 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.

Check out your portfolio center.

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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.