Correlation Between EDP Energias and Energy Of

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

By analyzing existing cross correlation between EDP Energias de and Energy of Minas, you can compare the effects of market volatilities on EDP Energias and Energy Of 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 Energy Of. Check out your portfolio center. Please also check ongoing floating volatility patterns of EDP Energias and Energy Of.

Diversification Opportunities for EDP Energias and Energy Of

0.52

Correlation Coefficient

EDP Energias  Energy Of

Very weak diversification

The 3 months correlation between EDP and Energy is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding EDP Energias de and Energy of Minas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy of Minas 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 de are associated (or correlated) with Energy Of. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy of Minas has no effect on the direction of EDP Energias i.e., EDP Energias and Energy Of go up and down completely randomly.

Pair Corralation between EDP Energias and Energy Of

Assuming the 90 days horizon EDP Energias de is expected to under-perform the Energy Of. But the pink sheet apears to be less risky and, when comparing its historical volatility, EDP Energias de is 1.49 times less risky than Energy Of. The pink sheet trades about -0.07 of its potential returns per unit of risk. The Energy of Minas is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  213.00  in Energy of Minas on September 29, 2024 and sell it today you would earn a total of  31.00  from holding Energy of Minas or generate 14.55% return on investment over 90 days.

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

EDP Energias de  vs.  Energy of Minas

EDP Energias de

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EDP Energias de has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Energy of Minas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Energy of Minas has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with EDP Energias and Energy Of

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

The idea behind EDP Energias de and Energy of Minas 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.