Correlation Between Equatorial Energia and Transmissora Aliana

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

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

Diversification Opportunities for Equatorial Energia and Transmissora Aliana

0.46

Correlation Coefficient

Equatorial Energia  Transmissora Aliana

Very weak diversification

The 3 months correlation between Equatorial and Transmissora is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Equatorial Energia 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 Equatorial Energia 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 Equatorial Energia 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 Equatorial Energia i.e., Equatorial Energia and Transmissora Aliana go up and down completely randomly.

Pair Corralation between Equatorial Energia and Transmissora Aliana

Assuming the 90 days trading horizon Equatorial Energia SA is expected to generate 1.89 times more return on investment than Transmissora Aliana. However, Equatorial Energia is 1.89 times more volatile than Transmissora Aliana de. It trades about 0.0 of its potential returns per unit of risk. Transmissora Aliana de is currently generating about -0.07 per unit of risk. If you would invest  3,014  in Equatorial Energia SA on December 4, 2024 and sell it today you would lose (8.00) from holding Equatorial Energia SA or give up 0.27% of portfolio value over 90 days.

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

Equatorial Energia SA  vs.  Transmissora Aliana de

Equatorial Energia

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Equatorial Energia SA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Equatorial Energia is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Transmissora Aliana

Risk-Adjusted Performance

Very Weak

Over the last 90 days Transmissora Aliana de has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Transmissora Aliana 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 Equatorial Energia and Transmissora Aliana

The main advantage of trading using opposite Equatorial Energia and Transmissora Aliana positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equatorial Energia 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 Equatorial Energia 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.

Check out your portfolio center.

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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.