Correlation Between Renova Energia and Equatorial Par

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

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

Diversification Opportunities for Renova Energia and Equatorial Par

0.63

Correlation Coefficient

Renova Energia  Equatorial Par

Poor diversification

The 3 months correlation between Renova and Equatorial is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Renova Energia SA and Equatorial Par Distribuidora in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equatorial Par Distr and Renova 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 Renova Energia SA are associated (or correlated) with Equatorial Par. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equatorial Par Distr has no effect on the direction of Renova Energia i.e., Renova Energia and Equatorial Par go up and down completely randomly.

Pair Corralation between Renova Energia and Equatorial Par

Assuming the 90 days trading horizon Renova Energia SA is expected to generate 1.51 times more return on investment than Equatorial Par. However, Renova Energia is 1.51 times more volatile than Equatorial Par Distribuidora. It trades about -0.12 of its potential returns per unit of risk. Equatorial Par Distribuidora is currently generating about -0.19 per unit of risk. If you would invest  97.00  in Renova Energia SA on October 24, 2024 and sell it today you would lose (5.00) from holding Renova Energia SA or give up 5.15% of portfolio value over 90 days.

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

Renova Energia SA  vs.  Equatorial Par Distribuidora

Renova Energia SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Renova Energia SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Preferred 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.

Equatorial Par Distr

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Equatorial Par Distribuidora has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Renova Energia and Equatorial Par

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

The idea behind Renova Energia SA and Equatorial Par Distribuidora 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.