Correlation Between Alupar Investimento and Equatorial Energia

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

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

Diversification Opportunities for Alupar Investimento and Equatorial Energia

0.85

Correlation Coefficient

Alupar Investimento  Equatorial Energia

Very poor diversification

The 3 months correlation between Alupar and Equatorial is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Alupar Investimento SA and Equatorial Energia SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equatorial Energia and Alupar Investimento 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 Alupar Investimento SA 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 Alupar Investimento i.e., Alupar Investimento and Equatorial Energia go up and down completely randomly.

Pair Corralation between Alupar Investimento and Equatorial Energia

Assuming the 90 days trading horizon Alupar Investimento SA is expected to under-perform the Equatorial Energia. But the stock apears to be less risky and, when comparing its historical volatility, Alupar Investimento SA is 1.28 times less risky than Equatorial Energia. The stock trades about -0.19 of its potential returns per unit of risk. The Equatorial Energia SA is currently generating about -0.14 of returns per unit of risk over similar time horizon. If you would invest  3,406  in Equatorial Energia SA on September 14, 2024 and sell it today you would lose (439.00) from holding Equatorial Energia SA or give up 12.89% of portfolio value over 90 days.

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

Alupar Investimento SA  vs.  Equatorial Energia SA

Alupar Investimento

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alupar Investimento SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat 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.

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 basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Alupar Investimento and Equatorial Energia

The main advantage of trading using opposite Alupar Investimento and Equatorial Energia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alupar Investimento 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 Alupar Investimento SA 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.