Correlation Between Companhia and Energisa

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

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

Diversification Opportunities for Companhia and Energisa

-0.27

Correlation Coefficient

Companhia  Energisa

Very good diversification

The 3 months correlation between Companhia and Energisa is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Companhia de Gs and Energisa SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energisa SA and Companhia 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 de Gs 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 Companhia i.e., Companhia and Energisa go up and down completely randomly.

Pair Corralation between Companhia and Energisa

Assuming the 90 days trading horizon Companhia de Gs is expected to generate 1.57 times more return on investment than Energisa. However, Companhia is 1.57 times more volatile than Energisa SA. It trades about 0.02 of its potential returns per unit of risk. Energisa SA is currently generating about 0.01 per unit of risk. If you would invest  12,011  in Companhia de Gs on December 2, 2024 and sell it today you would lose (2.00) from holding Companhia de Gs or give up 0.02% of portfolio value over 90 days.

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

Companhia de Gs  vs.  Energisa SA

Companhia de Gs

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Companhia de Gs are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Companhia may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Energisa SA

Risk-Adjusted Performance

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 comparatively stable basic indicators, Energisa 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 Companhia and Energisa

The main advantage of trading using opposite Companhia and Energisa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Companhia 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 Companhia de Gs 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.

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