Correlation Between EDP Energias and Navigator

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

By analyzing existing cross correlation between EDP Energias and The Navigator, you can compare the effects of market volatilities on EDP Energias and Navigator 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 EDP Energias with a short position of Navigator. Check out your portfolio center. Please also check ongoing floating volatility patterns of EDP Energias and Navigator.

Diversification Opportunities for EDP Energias and Navigator

-0.3

Correlation Coefficient

EDP Energias  Navigator

Very good diversification

The 3 months correlation between EDP and Navigator is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding EDP Energias and The Navigator in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Navigator and EDP Energias 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 EDP Energias are associated (or correlated) with Navigator. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Navigator has no effect on the direction of EDP Energias i.e., EDP Energias and Navigator go up and down completely randomly.

Pair Corralation between EDP Energias and Navigator

Assuming the 90 days trading horizon EDP Energias is expected to generate 1.91 times more return on investment than Navigator. However, EDP Energias is 1.91 times more volatile than The Navigator. It trades about 0.0 of its potential returns per unit of risk. The Navigator is currently generating about -0.06 per unit of risk. If you would invest  313.00  in EDP Energias on December 27, 2024 and sell it today you would lose (3.00) from holding EDP Energias or give up 0.96% of portfolio value over 90 days.

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

EDP Energias  vs.  The Navigator

EDP Energias

Risk-Adjusted Performance

Very Weak

Over the last 90 days EDP Energias has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, EDP Energias is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Navigator

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Navigator has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Navigator is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with EDP Energias and Navigator

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

The idea behind EDP Energias and The Navigator 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.

Check out your portfolio center.

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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.