Correlation Between Energisa and Equity Residential

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

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

Diversification Opportunities for Energisa and Equity Residential

-0.86

Correlation Coefficient

Energisa  Equity Residential

Pay attention - limited upside

The 3 months correlation between Energisa and Equity is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Energisa SA and Equity Residential in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equity Residential 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 Equity Residential. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equity Residential has no effect on the direction of Energisa i.e., Energisa and Equity Residential go up and down completely randomly.

Pair Corralation between Energisa and Equity Residential

Assuming the 90 days trading horizon Energisa SA is expected to generate 1.33 times more return on investment than Equity Residential. However, Energisa is 1.33 times more volatile than Equity Residential. It trades about 0.09 of its potential returns per unit of risk. Equity Residential is currently generating about -0.11 per unit of risk. If you would invest  3,719  in Energisa SA on December 26, 2024 and sell it today you would earn a total of  372.00  from holding Energisa SA or generate 10.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

Energisa SA  vs.  Equity Residential

Energisa SA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Energisa SA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain technical and fundamental indicators, Energisa may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Equity Residential

Risk-Adjusted Performance

Very Weak

Over the last 90 days Equity Residential has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Energisa and Equity Residential

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

The idea behind Energisa SA and Equity Residential 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.