Correlation Between Energisa and XP Corporate

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

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

Diversification Opportunities for Energisa and XP Corporate

0.81

Correlation Coefficient

Energisa  XP Corporate

Very poor diversification

The 3 months correlation between Energisa and XPCM11 is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Energisa SA and XP Corporate Maca in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XP Corporate Maca 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 XP Corporate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XP Corporate Maca has no effect on the direction of Energisa i.e., Energisa and XP Corporate go up and down completely randomly.

Pair Corralation between Energisa and XP Corporate

Assuming the 90 days trading horizon Energisa SA is expected to under-perform the XP Corporate. In addition to that, Energisa is 1.43 times more volatile than XP Corporate Maca. It trades about -0.15 of its total potential returns per unit of risk. XP Corporate Maca is currently generating about -0.05 per unit of volatility. If you would invest  730.00  in XP Corporate Maca on October 10, 2024 and sell it today you would lose (29.00) from holding XP Corporate Maca or give up 3.97% of portfolio value over 90 days.

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

Energisa SA  vs.  XP Corporate Maca

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.

XP Corporate Maca

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days XP Corporate Maca has generated negative risk-adjusted returns adding no value to fund investors. Despite somewhat strong fundamental indicators, XP Corporate 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 XP Corporate

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

The idea behind Energisa SA and XP Corporate Maca 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.