Correlation Between Empresa Metropolitana and Energisa

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

By analyzing existing cross correlation between Empresa Metropolitana de and Energisa SA, you can compare the effects of market volatilities on Empresa Metropolitana and Energisa 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 Empresa Metropolitana with a short position of Energisa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Empresa Metropolitana and Energisa.

Diversification Opportunities for Empresa Metropolitana and Energisa

0.28

Correlation Coefficient

Empresa Metropolitana  Energisa

Modest diversification

The 3 months correlation between Empresa and Energisa is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Empresa Metropolitana de and Energisa SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energisa SA and Empresa Metropolitana 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 Empresa Metropolitana de are associated (or correlated) with Energisa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energisa SA has no effect on the direction of Empresa Metropolitana i.e., Empresa Metropolitana and Energisa go up and down completely randomly.

Pair Corralation between Empresa Metropolitana and Energisa

Assuming the 90 days trading horizon Empresa Metropolitana de is expected to generate 0.77 times more return on investment than Energisa. However, Empresa Metropolitana de is 1.3 times less risky than Energisa. It trades about -0.04 of its potential returns per unit of risk. Energisa SA is currently generating about -0.14 per unit of risk. If you would invest  3,973  in Empresa Metropolitana de on October 21, 2024 and sell it today you would lose (204.00) from holding Empresa Metropolitana de or give up 5.13% of portfolio value over 90 days.

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

Empresa Metropolitana de  vs.  Energisa SA

Empresa Metropolitana

Risk-Adjusted Performance

0 of 100

Very Weak

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

Energisa SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Energisa 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 February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Empresa Metropolitana and Energisa

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

The idea behind Empresa Metropolitana de and Energisa 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.