Correlation Between Companhia Energética and EVN AG

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

Diversification Opportunities for Companhia Energética and EVN AG

-0.09

Correlation Coefficient

Companhia Energética  EVN AG

Good diversification

The 3 months correlation between Companhia and EVN is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Companhia Energtica de and EVN AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EVN AG 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 EVN AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EVN AG has no effect on the direction of Companhia Energética i.e., Companhia Energética and EVN AG go up and down completely randomly.

Pair Corralation between Companhia Energética and EVN AG

Assuming the 90 days trading horizon Companhia Energtica de is expected to generate 1.51 times more return on investment than EVN AG. However, Companhia Energética is 1.51 times more volatile than EVN AG. It trades about 0.21 of its potential returns per unit of risk. EVN AG is currently generating about -0.16 per unit of risk. If you would invest  156.00  in Companhia Energtica de on October 11, 2024 and sell it today you would earn a total of  21.00  from holding Companhia Energtica de or generate 13.46% return on investment over 90 days.

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

Companhia Energtica de  vs.  EVN AG

Companhia Energética

Risk-Adjusted Performance

6 of 100

Insignificant

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.

EVN AG

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Companhia Energética and EVN AG

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

The idea behind Companhia Energtica de and EVN AG 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.