Correlation Between Duke Energy and Engie Brasil

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

By analyzing existing cross correlation between Duke Energy and Engie Brasil Energia, you can compare the effects of market volatilities on Duke Energy and Engie Brasil 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 Duke Energy with a short position of Engie Brasil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Duke Energy and Engie Brasil.

Diversification Opportunities for Duke Energy and Engie Brasil

0.74

Correlation Coefficient

Duke Energy  Engie Brasil

Poor diversification

The 3 months correlation between Duke and Engie is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Duke Energy and Engie Brasil Energia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Engie Brasil Energia and Duke Energy 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 Duke Energy are associated (or correlated) with Engie Brasil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Engie Brasil Energia has no effect on the direction of Duke Energy i.e., Duke Energy and Engie Brasil go up and down completely randomly.

Pair Corralation between Duke Energy and Engie Brasil

Assuming the 90 days trading horizon Duke Energy is expected to generate 3.09 times less return on investment than Engie Brasil. But when comparing it to its historical volatility, Duke Energy is 4.32 times less risky than Engie Brasil. It trades about 0.05 of its potential returns per unit of risk. Engie Brasil Energia is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  624.00  in Engie Brasil Energia on November 19, 2024 and sell it today you would earn a total of  21.00  from holding Engie Brasil Energia or generate 3.37% return on investment over 90 days.

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

Duke Energy  vs.  Engie Brasil Energia

Duke Energy

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Duke Energy are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong forward-looking signals, Duke Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Engie Brasil Energia

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Engie Brasil Energia are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical and fundamental indicators, Engie Brasil is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Duke Energy and Engie Brasil

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

The idea behind Duke Energy and Engie Brasil Energia 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.