Correlation Between Brenmiller Energy and EDP Renovaveis

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

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

Diversification Opportunities for Brenmiller Energy and EDP Renovaveis

0.38

Correlation Coefficient

Brenmiller Energy  EDP Renovaveis

Weak diversification

The 3 months correlation between Brenmiller and EDP is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Brenmiller Energy Ltd and EDP Renovaveis in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EDP Renovaveis and Brenmiller Energy 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 Brenmiller Energy Ltd are associated (or correlated) with EDP Renovaveis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EDP Renovaveis has no effect on the direction of Brenmiller Energy i.e., Brenmiller Energy and EDP Renovaveis go up and down completely randomly.

Pair Corralation between Brenmiller Energy and EDP Renovaveis

Given the investment horizon of 90 days Brenmiller Energy Ltd is expected to under-perform the EDP Renovaveis. In addition to that, Brenmiller Energy is 3.86 times more volatile than EDP Renovaveis. It trades about -0.02 of its total potential returns per unit of risk. EDP Renovaveis is currently generating about -0.06 per unit of volatility. If you would invest  2,239  in EDP Renovaveis on September 27, 2024 and sell it today you would lose (1,216) from holding EDP Renovaveis or give up 54.31% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	86.12%
Values	Daily Returns

Brenmiller Energy Ltd  vs.  EDP Renovaveis

Brenmiller Energy

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Brenmiller Energy Ltd are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal basic indicators, Brenmiller Energy reported solid returns over the last few months and may actually be approaching a breakup point.

EDP Renovaveis

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EDP Renovaveis has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Brenmiller Energy and EDP Renovaveis

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

The idea behind Brenmiller Energy Ltd and EDP Renovaveis 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.