Correlation Between Energisa and Hsi Ativos

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

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

Diversification Opportunities for Energisa and Hsi Ativos

0.36

Correlation Coefficient

Energisa  Hsi Ativos

Weak diversification

The 3 months correlation between Energisa and Hsi is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Energisa SA and Hsi Ativos Financeiros in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hsi Ativos Financeiros 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 Hsi Ativos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hsi Ativos Financeiros has no effect on the direction of Energisa i.e., Energisa and Hsi Ativos go up and down completely randomly.

Pair Corralation between Energisa and Hsi Ativos

Assuming the 90 days trading horizon Energisa SA is expected to under-perform the Hsi Ativos. But the stock apears to be less risky and, when comparing its historical volatility, Energisa SA is 1.07 times less risky than Hsi Ativos. The stock trades about -0.12 of its potential returns per unit of risk. The Hsi Ativos Financeiros is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  7,449  in Hsi Ativos Financeiros on October 26, 2024 and sell it today you would earn a total of  12.00  from holding Hsi Ativos Financeiros or generate 0.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.31%
Values	Daily Returns

Energisa SA  vs.  Hsi Ativos Financeiros

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.

Hsi Ativos Financeiros

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Hsi Ativos Financeiros has generated negative risk-adjusted returns adding no value to fund investors. Despite somewhat strong basic indicators, Hsi Ativos is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Energisa and Hsi Ativos

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

The idea behind Energisa SA and Hsi Ativos Financeiros 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.