Correlation Between Energisa and Grendene

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

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

Diversification Opportunities for Energisa and Grendene

-0.17

Correlation Coefficient

Energisa  Grendene

Good diversification

The 3 months correlation between Energisa and Grendene is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Energisa SA and Grendene SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grendene SA 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 Grendene. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grendene SA has no effect on the direction of Energisa i.e., Energisa and Grendene go up and down completely randomly.

Pair Corralation between Energisa and Grendene

Assuming the 90 days trading horizon Energisa SA is expected to under-perform the Grendene. But the stock apears to be less risky and, when comparing its historical volatility, Energisa SA is 1.06 times less risky than Grendene. The stock trades about -0.08 of its potential returns per unit of risk. The Grendene SA is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  574.00  in Grendene SA on October 26, 2024 and sell it today you would lose (22.00) from holding Grendene SA or give up 3.83% of portfolio value over 90 days.

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

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

Grendene SA

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Grendene SA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Grendene may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Energisa and Grendene

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

The idea behind Energisa SA and Grendene 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.