Correlation Between Energisa and Domo Fundo

Can any of the company-specific risk be diversified away by investing in both Energisa and Domo 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 Domo 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 Domo Fundo de, you can compare the effects of market volatilities on Energisa and Domo 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 Domo Fundo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energisa and Domo Fundo.

Diversification Opportunities for Energisa and Domo Fundo

-0.73

Correlation Coefficient

Energisa  Domo Fundo

Pay attention - limited upside

The 3 months correlation between Energisa and Domo is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Energisa SA and Domo Fundo de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Domo 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 Domo Fundo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Domo Fundo de has no effect on the direction of Energisa i.e., Energisa and Domo Fundo go up and down completely randomly.

Pair Corralation between Energisa and Domo Fundo

Assuming the 90 days trading horizon Energisa SA is expected to under-perform the Domo Fundo. In addition to that, Energisa is 1.39 times more volatile than Domo Fundo de. It trades about -0.11 of its total potential returns per unit of risk. Domo Fundo de is currently generating about 0.13 per unit of volatility. If you would invest  7,410  in Domo Fundo de on October 26, 2024 and sell it today you would earn a total of  789.00  from holding Domo Fundo de or generate 10.65% return on investment over 90 days.

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

Energisa SA  vs.  Domo 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.

Domo Fundo de

Risk-Adjusted Performance

10 of 100

OK

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

Pair Trading with Energisa and Domo Fundo

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

The idea behind Energisa SA and Domo 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.