Correlation Between Energisa and Metalrgica Riosulense

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

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

Diversification Opportunities for Energisa and Metalrgica Riosulense

0.87

Correlation Coefficient

Energisa  Metalrgica Riosulense

Very poor diversification

The 3 months correlation between Energisa and Metalrgica is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Energisa SA and Metalrgica Riosulense SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Metalrgica Riosulense 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 Metalrgica Riosulense. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Metalrgica Riosulense has no effect on the direction of Energisa i.e., Energisa and Metalrgica Riosulense go up and down completely randomly.

Pair Corralation between Energisa and Metalrgica Riosulense

Assuming the 90 days trading horizon Energisa SA is expected to under-perform the Metalrgica Riosulense. In addition to that, Energisa is 1.2 times more volatile than Metalrgica Riosulense SA. It trades about -0.14 of its total potential returns per unit of risk. Metalrgica Riosulense SA is currently generating about -0.12 per unit of volatility. If you would invest  6,180  in Metalrgica Riosulense SA on October 24, 2024 and sell it today you would lose (680.00) from holding Metalrgica Riosulense SA or give up 11.0% of portfolio value over 90 days.

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

Energisa SA  vs.  Metalrgica Riosulense 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.

Metalrgica Riosulense

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Metalrgica Riosulense SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Preferred Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Energisa and Metalrgica Riosulense

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

The idea behind Energisa SA and Metalrgica Riosulense 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.

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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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.