Correlation Between Engie Brasil and Randon SA

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

Diversification Opportunities for Engie Brasil and Randon SA

0.72

Correlation Coefficient

Engie Brasil  Randon SA

Poor diversification

The 3 months correlation between Engie and Randon is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Engie Brasil Energia and Randon SA Implementos in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Randon SA Implementos 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 Randon SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Randon SA Implementos has no effect on the direction of Engie Brasil i.e., Engie Brasil and Randon SA go up and down completely randomly.

Pair Corralation between Engie Brasil and Randon SA

Assuming the 90 days trading horizon Engie Brasil Energia is expected to generate 0.51 times more return on investment than Randon SA. However, Engie Brasil Energia is 1.96 times less risky than Randon SA. It trades about -0.01 of its potential returns per unit of risk. Randon SA Implementos is currently generating about -0.03 per unit of risk. If you would invest  3,768  in Engie Brasil Energia on November 29, 2024 and sell it today you would lose (48.00) from holding Engie Brasil Energia or give up 1.27% of portfolio value over 90 days.

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

Engie Brasil Energia  vs.  Randon SA Implementos

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.

Randon SA Implementos

Risk-Adjusted Performance

Very Weak

Over the last 90 days Randon SA Implementos has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Randon SA 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 Engie Brasil and Randon SA

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

The idea behind Engie Brasil Energia and Randon SA Implementos 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.