Correlation Between Companhiade Eletricidade and Energisa

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

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

Diversification Opportunities for Companhiade Eletricidade and Energisa

0.18

Correlation Coefficient

Companhiade Eletricidade  Energisa

Average diversification

The 3 months correlation between Companhiade and Energisa is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Companhiade Eletricidade do and Energisa SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energisa SA and Companhiade Eletricidade 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 Companhiade Eletricidade do are associated (or correlated) with Energisa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energisa SA has no effect on the direction of Companhiade Eletricidade i.e., Companhiade Eletricidade and Energisa go up and down completely randomly.

Pair Corralation between Companhiade Eletricidade and Energisa

Assuming the 90 days trading horizon Companhiade Eletricidade do is expected to generate 0.46 times more return on investment than Energisa. However, Companhiade Eletricidade do is 2.16 times less risky than Energisa. It trades about -0.04 of its potential returns per unit of risk. Energisa SA is currently generating about -0.09 per unit of risk. If you would invest  3,914  in Companhiade Eletricidade do on October 26, 2024 and sell it today you would lose (114.00) from holding Companhiade Eletricidade do or give up 2.91% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.28%
Values	Daily Returns

Companhiade Eletricidade do  vs.  Energisa SA

Companhiade Eletricidade

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Companhiade Eletricidade do has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Companhiade Eletricidade is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Energisa SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Energisa SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Preferred Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Companhiade Eletricidade and Energisa

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

The idea behind Companhiade Eletricidade do and Energisa 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.

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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.