Correlation Between Companhia Energtica and Equatorial Maranho

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

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

Diversification Opportunities for Companhia Energtica and Equatorial Maranho

-0.44

Correlation Coefficient

Companhia Energtica  Equatorial Maranho

Very good diversification

The 3 months correlation between Companhia and Equatorial is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Companhia Energtica de and Equatorial Maranho Distribuido in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equatorial Maranho and Companhia Energtica 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 Companhia Energtica de are associated (or correlated) with Equatorial Maranho. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equatorial Maranho has no effect on the direction of Companhia Energtica i.e., Companhia Energtica and Equatorial Maranho go up and down completely randomly.

Pair Corralation between Companhia Energtica and Equatorial Maranho

Assuming the 90 days trading horizon Companhia Energtica de is expected to under-perform the Equatorial Maranho. In addition to that, Companhia Energtica is 1.44 times more volatile than Equatorial Maranho Distribuidora. It trades about -0.06 of its total potential returns per unit of risk. Equatorial Maranho Distribuidora is currently generating about -0.01 per unit of volatility. If you would invest  2,429  in Equatorial Maranho Distribuidora on October 22, 2024 and sell it today you would lose (30.00) from holding Equatorial Maranho Distribuidora or give up 1.24% of portfolio value over 90 days.

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

Companhia Energtica de  vs.  Equatorial Maranho Distribuido

Companhia Energtica

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Companhia Energtica de has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Equatorial Maranho

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Equatorial Maranho Distribuidora has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong primary indicators, Equatorial Maranho is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Companhia Energtica and Equatorial Maranho

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

The idea behind Companhia Energtica de and Equatorial Maranho Distribuidora 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.