Correlation Between Energisa and Companhiade Eletricidade

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

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

Diversification Opportunities for Energisa and Companhiade Eletricidade

0.37

Correlation Coefficient

Energisa  Companhiade Eletricidade

Weak diversification

The 3 months correlation between Energisa and Companhiade is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Energisa SA and Companhiade Eletricidade do in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Companhiade Eletricidade 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 Companhiade Eletricidade. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Companhiade Eletricidade has no effect on the direction of Energisa i.e., Energisa and Companhiade Eletricidade go up and down completely randomly.

Pair Corralation between Energisa and Companhiade Eletricidade

Assuming the 90 days trading horizon Energisa SA is expected to under-perform the Companhiade Eletricidade. In addition to that, Energisa is 1.68 times more volatile than Companhiade Eletricidade do. It trades about -0.18 of its total potential returns per unit of risk. Companhiade Eletricidade do is currently generating about 0.01 per unit of volatility. If you would invest  3,870  in Companhiade Eletricidade do on October 11, 2024 and sell it today you would earn a total of  5.00  from holding Companhiade Eletricidade do or generate 0.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.28%
Values	Daily Returns

Energisa SA  vs.  Companhiade Eletricidade do

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. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Companhiade Eletricidade

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Companhiade Eletricidade do has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Companhiade Eletricidade is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Energisa and Companhiade Eletricidade

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

The idea behind Energisa SA and Companhiade Eletricidade do 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.