Correlation Between Engie Brasil and Companhiade Eletricidade

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

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

Diversification Opportunities for Engie Brasil and Companhiade Eletricidade

-0.3

Correlation Coefficient

Engie Brasil  Companhiade Eletricidade

Very good diversification

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

Pair Corralation between Engie Brasil and Companhiade Eletricidade

Assuming the 90 days trading horizon Engie Brasil is expected to generate 3.53 times less return on investment than Companhiade Eletricidade. In addition to that, Engie Brasil is 1.2 times more volatile than Companhiade Eletricidade do. It trades about 0.01 of its total potential returns per unit of risk. Companhiade Eletricidade do is currently generating about 0.04 per unit of volatility. If you would invest  3,736  in Companhiade Eletricidade do on December 1, 2024 and sell it today you would earn a total of  84.00  from holding Companhiade Eletricidade do or generate 2.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.72%
Values	Daily Returns

Engie Brasil Energia  vs.  Companhiade Eletricidade do

Engie Brasil Energia

Risk-Adjusted Performance

Very Weak

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

Companhiade Eletricidade

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Companhiade Eletricidade do are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Companhiade Eletricidade is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Engie Brasil and Companhiade Eletricidade

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

The idea behind Engie Brasil Energia and Companhiade Eletricidade do 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.