Correlation Between Energisa and IShares BMFBovespa

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

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

Diversification Opportunities for Energisa and IShares BMFBovespa

0.95

Correlation Coefficient

Energisa  IShares BMFBovespa

Almost no diversification

The 3 months correlation between Energisa and IShares is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Energisa SA and iShares BMFBovespa Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares BMFBovespa Small 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 IShares BMFBovespa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares BMFBovespa Small has no effect on the direction of Energisa i.e., Energisa and IShares BMFBovespa go up and down completely randomly.

Pair Corralation between Energisa and IShares BMFBovespa

Assuming the 90 days trading horizon Energisa is expected to generate 14.95 times less return on investment than IShares BMFBovespa. In addition to that, Energisa is 1.13 times more volatile than iShares BMFBovespa Small. It trades about 0.01 of its total potential returns per unit of risk. iShares BMFBovespa Small is currently generating about 0.09 per unit of volatility. If you would invest  8,570  in iShares BMFBovespa Small on October 23, 2024 and sell it today you would earn a total of  170.00  from holding iShares BMFBovespa Small or generate 1.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	94.44%
Values	Daily Returns

Energisa SA  vs.  iShares BMFBovespa Small

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.

iShares BMFBovespa Small

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares BMFBovespa Small has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Etf's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

Pair Trading with Energisa and IShares BMFBovespa

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

The idea behind Energisa SA and iShares BMFBovespa Small 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.