Correlation Between Energisa and Transmissora Aliana

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

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

Diversification Opportunities for Energisa and Transmissora Aliana

0.6

Correlation Coefficient

Energisa  Transmissora Aliana

Poor diversification

The 3 months correlation between Energisa and Transmissora is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Energisa SA and Transmissora Aliana de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transmissora Aliana 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 Transmissora Aliana. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transmissora Aliana has no effect on the direction of Energisa i.e., Energisa and Transmissora Aliana go up and down completely randomly.

Pair Corralation between Energisa and Transmissora Aliana

Assuming the 90 days trading horizon Energisa SA is expected to under-perform the Transmissora Aliana. In addition to that, Energisa is 2.09 times more volatile than Transmissora Aliana de. It trades about 0.0 of its total potential returns per unit of risk. Transmissora Aliana de is currently generating about 0.04 per unit of volatility. If you would invest  3,411  in Transmissora Aliana de on September 13, 2024 and sell it today you would earn a total of  20.00  from holding Transmissora Aliana de or generate 0.59% return on investment over 90 days.

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

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

Transmissora Aliana

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Transmissora Aliana de has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Transmissora Aliana is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Energisa and Transmissora Aliana

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

The idea behind Energisa SA and Transmissora Aliana 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.