Correlation Between Itasa Investimentos and Engie Brasil

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

By analyzing existing cross correlation between Itasa Investimentos and Engie Brasil Energia, you can compare the effects of market volatilities on Itasa Investimentos and Engie Brasil 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 Itasa Investimentos with a short position of Engie Brasil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Itasa Investimentos and Engie Brasil.

Diversification Opportunities for Itasa Investimentos and Engie Brasil

0.89

Correlation Coefficient

Itasa Investimentos  Engie Brasil

Very poor diversification

The 3 months correlation between Itasa and Engie is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Itasa Investimentos and Engie Brasil Energia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Engie Brasil Energia and Itasa Investimentos 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 Itasa Investimentos are associated (or correlated) with Engie Brasil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Engie Brasil Energia has no effect on the direction of Itasa Investimentos i.e., Itasa Investimentos and Engie Brasil go up and down completely randomly.

Pair Corralation between Itasa Investimentos and Engie Brasil

Assuming the 90 days trading horizon Itasa Investimentos is expected to generate 2.06 times more return on investment than Engie Brasil. However, Itasa Investimentos is 2.06 times more volatile than Engie Brasil Energia. It trades about 0.14 of its potential returns per unit of risk. Engie Brasil Energia is currently generating about 0.17 per unit of risk. If you would invest  840.00  in Itasa Investimentos on December 30, 2024 and sell it today you would earn a total of  147.00  from holding Itasa Investimentos or generate 17.5% return on investment over 90 days.

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

Itasa Investimentos  vs.  Engie Brasil Energia

Itasa Investimentos

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Itasa Investimentos are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Itasa Investimentos unveiled solid returns over the last few months and may actually be approaching a breakup point.

Engie Brasil Energia

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Engie Brasil Energia are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Engie Brasil may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Itasa Investimentos and Engie Brasil

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

The idea behind Itasa Investimentos and Engie Brasil Energia 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.