Correlation Between Companhia Energética and SIDETRADE

Can any of the company-specific risk be diversified away by investing in both Companhia Energética and SIDETRADE 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 Energética and SIDETRADE 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 SIDETRADE EO 1, you can compare the effects of market volatilities on Companhia Energética and SIDETRADE 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 Energética with a short position of SIDETRADE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Companhia Energética and SIDETRADE.

Diversification Opportunities for Companhia Energética and SIDETRADE

0.25

Correlation Coefficient

Companhia Energética  SIDETRADE

Modest diversification

The 3 months correlation between Companhia and SIDETRADE is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Companhia Energtica de and SIDETRADE EO 1 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SIDETRADE EO 1 and Companhia Energética 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 SIDETRADE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SIDETRADE EO 1 has no effect on the direction of Companhia Energética i.e., Companhia Energética and SIDETRADE go up and down completely randomly.

Pair Corralation between Companhia Energética and SIDETRADE

Assuming the 90 days trading horizon Companhia Energtica de is expected to generate 2.78 times more return on investment than SIDETRADE. However, Companhia Energética is 2.78 times more volatile than SIDETRADE EO 1. It trades about 0.09 of its potential returns per unit of risk. SIDETRADE EO 1 is currently generating about 0.04 per unit of risk. If you would invest  31.00  in Companhia Energtica de on October 11, 2024 and sell it today you would earn a total of  146.00  from holding Companhia Energtica de or generate 470.97% return on investment over 90 days.

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

Companhia Energtica de  vs.  SIDETRADE EO 1

Companhia Energética

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Companhia Energtica de are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Companhia Energética reported solid returns over the last few months and may actually be approaching a breakup point.

SIDETRADE EO 1

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SIDETRADE EO 1 are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, SIDETRADE is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Companhia Energética and SIDETRADE

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

The idea behind Companhia Energtica de and SIDETRADE EO 1 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.