Correlation Between Eneva SA and Banco BTG

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

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

Diversification Opportunities for Eneva SA and Banco BTG

0.81

Correlation Coefficient

Eneva SA  Banco BTG

Very poor diversification

The 3 months correlation between Eneva and Banco is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Eneva SA and Banco BTG Pactual in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco BTG Pactual 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 Banco BTG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco BTG Pactual has no effect on the direction of Eneva SA i.e., Eneva SA and Banco BTG go up and down completely randomly.

Pair Corralation between Eneva SA and Banco BTG

Assuming the 90 days trading horizon Eneva SA is expected to generate 1.14 times less return on investment than Banco BTG. In addition to that, Eneva SA is 1.26 times more volatile than Banco BTG Pactual. It trades about 0.18 of its total potential returns per unit of risk. Banco BTG Pactual is currently generating about 0.26 per unit of volatility. If you would invest  2,695  in Banco BTG Pactual on December 31, 2024 and sell it today you would earn a total of  795.00  from holding Banco BTG Pactual or generate 29.5% return on investment over 90 days.

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

Eneva SA  vs.  Banco BTG Pactual

Eneva SA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Eneva SA are ranked lower than 14 (%) 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.

Banco BTG Pactual

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Banco BTG Pactual are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Banco BTG sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eneva SA and Banco BTG

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

The idea behind Eneva SA and Banco BTG Pactual 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.