Correlation Between Energisa and Companhia

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

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

Diversification Opportunities for Energisa and Companhia

-0.2

Correlation Coefficient

Energisa  Companhia

Good diversification

The 3 months correlation between Energisa and Companhia is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Energisa SA and Companhia de Gs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Companhia de Gs 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 Companhia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Companhia de Gs has no effect on the direction of Energisa i.e., Energisa and Companhia go up and down completely randomly.

Pair Corralation between Energisa and Companhia

Assuming the 90 days trading horizon Energisa SA is expected to generate 0.59 times more return on investment than Companhia. However, Energisa SA is 1.68 times less risky than Companhia. It trades about 0.07 of its potential returns per unit of risk. Companhia de Gs is currently generating about 0.03 per unit of risk. If you would invest  1,013  in Energisa SA on December 2, 2024 and sell it today you would earn a total of  81.00  from holding Energisa SA or generate 8.0% return on investment over 90 days.

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

Energisa SA  vs.  Companhia de Gs

Energisa SA

Risk-Adjusted Performance

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 comparatively stable basic indicators, Energisa is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Companhia de Gs

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Companhia de Gs are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Companhia may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Energisa and Companhia

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

The idea behind Energisa SA and Companhia de Gs 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.