Correlation Between Lyxor 1 and Companhia Energética

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Can any of the company-specific risk be diversified away by investing in both Lyxor 1 and Companhia Energética 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 Lyxor 1 and Companhia Energética into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lyxor 1 and Companhia Energtica de, you can compare the effects of market volatilities on Lyxor 1 and Companhia Energética 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 Lyxor 1 with a short position of Companhia Energética. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lyxor 1 and Companhia Energética.

Diversification Opportunities for Lyxor 1 and Companhia Energética

-0.26
  Correlation Coefficient

Very good diversification

The 3 months correlation between Lyxor and Companhia is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Lyxor 1 and Companhia Energtica de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Companhia Energética and Lyxor 1 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 Lyxor 1 are associated (or correlated) with Companhia Energética. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Companhia Energética has no effect on the direction of Lyxor 1 i.e., Lyxor 1 and Companhia Energética go up and down completely randomly.

Pair Corralation between Lyxor 1 and Companhia Energética

Assuming the 90 days trading horizon Lyxor 1 is expected to generate 94.53 times less return on investment than Companhia Energética. But when comparing it to its historical volatility, Lyxor 1 is 6.26 times less risky than Companhia Energética. It trades about 0.01 of its potential returns per unit of risk. Companhia Energtica de is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  29.00  in Companhia Energtica de on October 5, 2024 and sell it today you would earn a total of  147.00  from holding Companhia Energtica de or generate 506.9% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy99.79%
ValuesDaily Returns

Lyxor 1   vs.  Companhia Energtica de

 Performance 
       Timeline  
Lyxor 1 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Insignificant
Over the last 90 days Lyxor 1 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Lyxor 1 is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.
Companhia Energética 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
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. Despite nearly fragile fundamental indicators, Companhia Energética reported solid returns over the last few months and may actually be approaching a breakup point.

Lyxor 1 and Companhia Energética Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Lyxor 1 and Companhia Energética

The main advantage of trading using opposite Lyxor 1 and Companhia Energética positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lyxor 1 position performs unexpectedly, Companhia Energética 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 Companhia Energética will offset losses from the drop in Companhia Energética's long position.
The idea behind Lyxor 1 and Companhia Energtica de 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.

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