Correlation Between Energisa and Bicicletas Monark

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

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

Diversification Opportunities for Energisa and Bicicletas Monark

0.63

Correlation Coefficient

Energisa  Bicicletas Monark

Poor diversification

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

Pair Corralation between Energisa and Bicicletas Monark

Assuming the 90 days trading horizon Energisa SA is expected to under-perform the Bicicletas Monark. But the stock apears to be less risky and, when comparing its historical volatility, Energisa SA is 1.05 times less risky than Bicicletas Monark. The stock trades about -0.17 of its potential returns per unit of risk. The Bicicletas Monark SA is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  30,610  in Bicicletas Monark SA on September 2, 2024 and sell it today you would earn a total of  288.00  from holding Bicicletas Monark SA or generate 0.94% return on investment over 90 days.

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

Energisa SA  vs.  Bicicletas Monark SA

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. Despite uncertain performance in the last few months, the Stock's technical and fundamental indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Bicicletas Monark

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bicicletas Monark SA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Bicicletas Monark is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Energisa and Bicicletas Monark

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

The idea behind Energisa SA and Bicicletas Monark 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.