Correlation Between Engie Brasil and Gafisa SA

Can any of the company-specific risk be diversified away by investing in both Engie Brasil and Gafisa SA 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 Gafisa SA 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 Gafisa SA, you can compare the effects of market volatilities on Engie Brasil and Gafisa SA 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 Gafisa SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Engie Brasil and Gafisa SA.

Diversification Opportunities for Engie Brasil and Gafisa SA

0.92

Correlation Coefficient

Engie Brasil  Gafisa SA

Almost no diversification

The 3 months correlation between Engie and Gafisa is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Engie Brasil Energia and Gafisa SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gafisa SA 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 Gafisa SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gafisa SA has no effect on the direction of Engie Brasil i.e., Engie Brasil and Gafisa SA go up and down completely randomly.

Pair Corralation between Engie Brasil and Gafisa SA

Assuming the 90 days trading horizon Engie Brasil Energia is expected to generate 0.24 times more return on investment than Gafisa SA. However, Engie Brasil Energia is 4.12 times less risky than Gafisa SA. It trades about -0.26 of its potential returns per unit of risk. Gafisa SA is currently generating about -0.2 per unit of risk. If you would invest  4,466  in Engie Brasil Energia on September 3, 2024 and sell it today you would lose (666.00) from holding Engie Brasil Energia or give up 14.91% of portfolio value over 90 days.

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

Engie Brasil Energia  vs.  Gafisa SA

Engie Brasil Energia

Risk-Adjusted Performance

0 of 100

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 weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Gafisa SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gafisa SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Engie Brasil and Gafisa SA

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

The idea behind Engie Brasil Energia and Gafisa SA 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.