Correlation Between Altri SGPS and EDP Energias

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

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

Diversification Opportunities for Altri SGPS and EDP Energias

-0.16

Correlation Coefficient

Altri SGPS  EDP Energias

Good diversification

The 3 months correlation between Altri and EDP is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Altri SGPS SA and EDP Energias in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EDP Energias and Altri SGPS 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 Altri SGPS SA are associated (or correlated) with EDP Energias. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EDP Energias has no effect on the direction of Altri SGPS i.e., Altri SGPS and EDP Energias go up and down completely randomly.

Pair Corralation between Altri SGPS and EDP Energias

Assuming the 90 days trading horizon Altri SGPS SA is expected to generate 0.67 times more return on investment than EDP Energias. However, Altri SGPS SA is 1.49 times less risky than EDP Energias. It trades about 0.17 of its potential returns per unit of risk. EDP Energias is currently generating about 0.03 per unit of risk. If you would invest  530.00  in Altri SGPS SA on December 29, 2024 and sell it today you would earn a total of  73.00  from holding Altri SGPS SA or generate 13.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Altri SGPS SA  vs.  EDP Energias

Altri SGPS SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Altri SGPS SA are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Altri SGPS unveiled solid returns over the last few months and may actually be approaching a breakup point.

EDP Energias

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in EDP Energias are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, EDP Energias is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Altri SGPS and EDP Energias

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

The idea behind Altri SGPS SA and EDP Energias 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.