Correlation Between Companhia Energtica and Energisa

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

Diversification Opportunities for Companhia Energtica and Energisa

-0.29

Correlation Coefficient

Companhia Energtica  Energisa

Very good diversification

The 3 months correlation between Companhia and Energisa is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Companhia Energtica de and Energisa SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energisa SA 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 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 Energtica i.e., Companhia Energtica and Energisa go up and down completely randomly.

Pair Corralation between Companhia Energtica and Energisa

Assuming the 90 days trading horizon Companhia Energtica de is expected to generate 1.26 times more return on investment than Energisa. However, Companhia Energtica is 1.26 times more volatile than Energisa SA. It trades about 0.05 of its potential returns per unit of risk. Energisa SA is currently generating about -0.18 per unit of risk. If you would invest  1,432  in Companhia Energtica de on September 1, 2024 and sell it today you would earn a total of  68.00  from holding Companhia Energtica de or generate 4.75% 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.  Energisa SA

Companhia Energtica

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Companhia Energtica de are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Companhia Energtica is not utilizing all of its potentials. The newest 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. Despite uncertain performance in the last few months, the Stock's technical and fundamental indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Companhia Energtica and Energisa

The main advantage of trading using opposite Companhia Energtica and Energisa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Companhia Energtica 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 Energtica de 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.