Correlation Between Avangrid and Equatorial Energia

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

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

Diversification Opportunities for Avangrid and Equatorial Energia

-0.55

Correlation Coefficient

Avangrid  Equatorial Energia

Excellent diversification

The 3 months correlation between Avangrid and Equatorial is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Avangrid and Equatorial Energia SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equatorial Energia and Avangrid 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 Avangrid are associated (or correlated) with Equatorial Energia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equatorial Energia has no effect on the direction of Avangrid i.e., Avangrid and Equatorial Energia go up and down completely randomly.

Pair Corralation between Avangrid and Equatorial Energia

Considering the 90-day investment horizon Avangrid is expected to generate 0.08 times more return on investment than Equatorial Energia. However, Avangrid is 12.64 times less risky than Equatorial Energia. It trades about 0.09 of its potential returns per unit of risk. Equatorial Energia SA is currently generating about -0.11 per unit of risk. If you would invest  3,566  in Avangrid on September 2, 2024 and sell it today you would earn a total of  44.00  from holding Avangrid or generate 1.23% return on investment over 90 days.

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

Avangrid  vs.  Equatorial Energia SA

Avangrid

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Avangrid are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, Avangrid is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Equatorial Energia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Equatorial Energia SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Avangrid and Equatorial Energia

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

The idea behind Avangrid and Equatorial Energia 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.