Correlation Between Energisa and GPS Participaes

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

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

Diversification Opportunities for Energisa and GPS Participaes

0.58

Correlation Coefficient

Energisa  GPS Participaes

Very weak diversification

The 3 months correlation between Energisa and GPS is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Energisa SA and GPS Participaes e in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GPS Participaes e 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 GPS Participaes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GPS Participaes e has no effect on the direction of Energisa i.e., Energisa and GPS Participaes go up and down completely randomly.

Pair Corralation between Energisa and GPS Participaes

Assuming the 90 days trading horizon Energisa SA is expected to generate 0.7 times more return on investment than GPS Participaes. However, Energisa SA is 1.43 times less risky than GPS Participaes. It trades about 0.02 of its potential returns per unit of risk. GPS Participaes e is currently generating about -0.19 per unit of risk. If you would invest  4,033  in Energisa SA on December 3, 2024 and sell it today you would earn a total of  18.00  from holding Energisa SA or generate 0.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	80.95%
Values	Daily Returns

Energisa SA  vs.  GPS Participaes e

Energisa SA

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Energisa SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, Energisa is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

GPS Participaes e

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Energisa and GPS Participaes

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

The idea behind Energisa SA and GPS Participaes e 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.