Correlation Between Eneva SA and Petro Rio

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

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

Diversification Opportunities for Eneva SA and Petro Rio

0.73

Correlation Coefficient

Eneva SA  Petro Rio

Poor diversification

The 3 months correlation between Eneva and Petro is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Eneva SA and Petro Rio SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petro Rio 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 Petro Rio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petro Rio SA has no effect on the direction of Eneva SA i.e., Eneva SA and Petro Rio go up and down completely randomly.

Pair Corralation between Eneva SA and Petro Rio

Assuming the 90 days trading horizon Eneva SA is expected to under-perform the Petro Rio. But the stock apears to be less risky and, when comparing its historical volatility, Eneva SA is 1.39 times less risky than Petro Rio. The stock trades about -0.23 of its potential returns per unit of risk. The Petro Rio SA is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  4,372  in Petro Rio SA on September 4, 2024 and sell it today you would lose (372.00) from holding Petro Rio SA or give up 8.51% of portfolio value over 90 days.

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

Eneva SA  vs.  Petro Rio SA

Eneva SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eneva SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Petro Rio SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Petro Rio SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Eneva SA and Petro Rio

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

The idea behind Eneva SA and Petro Rio 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.