Correlation Between Eneva SA and Companhia Energtica

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

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

Diversification Opportunities for Eneva SA and Companhia Energtica

0.53

Correlation Coefficient

Eneva SA  Companhia Energtica

Very weak diversification

The 3 months correlation between Eneva and Companhia is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Eneva SA and Companhia Energtica do in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Companhia Energtica 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 Companhia Energtica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Companhia Energtica has no effect on the direction of Eneva SA i.e., Eneva SA and Companhia Energtica go up and down completely randomly.

Pair Corralation between Eneva SA and Companhia Energtica

Assuming the 90 days trading horizon Eneva SA is expected to generate 0.88 times more return on investment than Companhia Energtica. However, Eneva SA is 1.14 times less risky than Companhia Energtica. It trades about 0.0 of its potential returns per unit of risk. Companhia Energtica do is currently generating about -0.08 per unit of risk. If you would invest  1,226  in Eneva SA on December 2, 2024 and sell it today you would lose (48.00) from holding Eneva SA or give up 3.92% of portfolio value over 90 days.

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

Eneva SA  vs.  Companhia Energtica do

Eneva SA

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Eneva SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Eneva SA is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Companhia Energtica

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Companhia Energtica do are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Companhia Energtica may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Eneva SA and Companhia Energtica

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

The idea behind Eneva SA and Companhia Energtica do 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.