Correlation Between Eneva SA and B3 SA

Can any of the company-specific risk be diversified away by investing in both Eneva SA and B3 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 Eneva SA and B3 SA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Eneva SA and B3 SA , you can compare the effects of market volatilities on Eneva SA and B3 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 Eneva SA with a short position of B3 SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eneva SA and B3 SA.

Diversification Opportunities for Eneva SA and B3 SA

0.63

Correlation Coefficient

Eneva SA  B3 SA

Poor diversification

The 3 months correlation between Eneva and B3SA3 is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Eneva SA and B3 SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on B3 SA and Eneva SA 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 Eneva SA are associated (or correlated) with B3 SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of B3 SA has no effect on the direction of Eneva SA i.e., Eneva SA and B3 SA go up and down completely randomly.

Pair Corralation between Eneva SA and B3 SA

Assuming the 90 days trading horizon Eneva SA is expected to generate 1.6 times less return on investment than B3 SA. But when comparing it to its historical volatility, Eneva SA is 1.13 times less risky than B3 SA. It trades about 0.09 of its potential returns per unit of risk. B3 SA is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,026  in B3 SA on December 30, 2024 and sell it today you would earn a total of  214.00  from holding B3 SA or generate 20.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	93.55%
Values	Daily Returns

Eneva SA  vs.  B3 SA

Eneva SA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Eneva SA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Eneva SA unveiled solid returns over the last few months and may actually be approaching a breakup point.

B3 SA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in B3 SA are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, B3 SA unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eneva SA and B3 SA

The main advantage of trading using opposite Eneva SA and B3 SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eneva SA position performs unexpectedly, B3 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 B3 SA will offset losses from the drop in B3 SA's long position.

The idea behind Eneva SA and B3 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.