Correlation Between EVN AG and Companhia Energética

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

By analyzing existing cross correlation between EVN AG and Companhia Energtica de, you can compare the effects of market volatilities on EVN AG and Companhia Energética 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 EVN AG with a short position of Companhia Energética. Check out your portfolio center. Please also check ongoing floating volatility patterns of EVN AG and Companhia Energética.

Diversification Opportunities for EVN AG and Companhia Energética

0.47

Correlation Coefficient

EVN AG  Companhia Energética

Very weak diversification

The 3 months correlation between EVN and Companhia is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding EVN AG and Companhia Energtica de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Companhia Energética and EVN AG 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 EVN AG are associated (or correlated) with Companhia Energética. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Companhia Energética has no effect on the direction of EVN AG i.e., EVN AG and Companhia Energética go up and down completely randomly.

Pair Corralation between EVN AG and Companhia Energética

Assuming the 90 days horizon EVN AG is expected to generate 0.26 times more return on investment than Companhia Energética. However, EVN AG is 3.79 times less risky than Companhia Energética. It trades about 0.12 of its potential returns per unit of risk. Companhia Energtica de is currently generating about 0.03 per unit of risk. If you would invest  2,029  in EVN AG on December 20, 2024 and sell it today you would earn a total of  211.00  from holding EVN AG or generate 10.4% return on investment over 90 days.

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

EVN AG  vs.  Companhia Energtica de

EVN AG

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in EVN AG are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, EVN AG may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Companhia Energética

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Companhia Energtica de are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady fundamental indicators, Companhia Energética may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with EVN AG and Companhia Energética

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

The idea behind EVN AG and Companhia Energtica 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.