Correlation Between EDP Renovaveis and Astra Energy

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

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

Diversification Opportunities for EDP Renovaveis and Astra Energy

0.05

Correlation Coefficient

EDP Renovaveis  Astra Energy

Significant diversification

The 3 months correlation between EDP and Astra is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding EDP Renovaveis and Astra Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Astra Energy and EDP Renovaveis 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 Renovaveis are associated (or correlated) with Astra Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Astra Energy has no effect on the direction of EDP Renovaveis i.e., EDP Renovaveis and Astra Energy go up and down completely randomly.

Pair Corralation between EDP Renovaveis and Astra Energy

Assuming the 90 days horizon EDP Renovaveis is expected to under-perform the Astra Energy. But the pink sheet apears to be less risky and, when comparing its historical volatility, EDP Renovaveis is 3.68 times less risky than Astra Energy. The pink sheet trades about -0.07 of its potential returns per unit of risk. The Astra Energy is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  7.84  in Astra Energy on December 27, 2024 and sell it today you would earn a total of  0.26  from holding Astra Energy or generate 3.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.77%
Values	Daily Returns

EDP Renovaveis  vs.  Astra Energy

EDP Renovaveis

Risk-Adjusted Performance

Very Weak

Over the last 90 days EDP Renovaveis has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Astra Energy

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Astra Energy are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Astra Energy exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with EDP Renovaveis and Astra Energy

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

The idea behind EDP Renovaveis and Astra Energy 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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .