Correlation Between Energisa and CF3 FUNDO

Can any of the company-specific risk be diversified away by investing in both Energisa and CF3 FUNDO 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 CF3 FUNDO into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Energisa SA and CF3 FUNDO DE, you can compare the effects of market volatilities on Energisa and CF3 FUNDO 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 CF3 FUNDO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energisa and CF3 FUNDO.

Diversification Opportunities for Energisa and CF3 FUNDO

-0.52

Correlation Coefficient

Energisa  CF3 FUNDO

Excellent diversification

The 3 months correlation between Energisa and CF3 is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Energisa SA and CF3 FUNDO DE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CF3 FUNDO DE 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 CF3 FUNDO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CF3 FUNDO DE has no effect on the direction of Energisa i.e., Energisa and CF3 FUNDO go up and down completely randomly.

Pair Corralation between Energisa and CF3 FUNDO

Assuming the 90 days trading horizon Energisa SA is expected to under-perform the CF3 FUNDO. In addition to that, Energisa is 1.71 times more volatile than CF3 FUNDO DE. It trades about -0.12 of its total potential returns per unit of risk. CF3 FUNDO DE is currently generating about 0.13 per unit of volatility. If you would invest  92,155  in CF3 FUNDO DE on October 26, 2024 and sell it today you would earn a total of  7,845  from holding CF3 FUNDO DE or generate 8.51% return on investment over 90 days.

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

Energisa SA  vs.  CF3 FUNDO DE

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 February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

CF3 FUNDO DE

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CF3 FUNDO DE are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat weak forward indicators, CF3 FUNDO may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Energisa and CF3 FUNDO

The main advantage of trading using opposite Energisa and CF3 FUNDO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Energisa position performs unexpectedly, CF3 FUNDO 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 CF3 FUNDO will offset losses from the drop in CF3 FUNDO's long position.

The idea behind Energisa SA and CF3 FUNDO DE 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 Transaction History module to view history of all your transactions and understand their impact on performance.