Correlation Between Alfa Holdings and Energisa

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

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

Diversification Opportunities for Alfa Holdings and Energisa

-0.22

Correlation Coefficient

Alfa Holdings  Energisa

Very good diversification

The 3 months correlation between Alfa and Energisa is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Alfa Holdings SA and Energisa SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energisa SA and Alfa Holdings 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 Alfa Holdings SA are associated (or correlated) with Energisa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energisa SA has no effect on the direction of Alfa Holdings i.e., Alfa Holdings and Energisa go up and down completely randomly.

Pair Corralation between Alfa Holdings and Energisa

Assuming the 90 days trading horizon Alfa Holdings SA is expected to under-perform the Energisa. In addition to that, Alfa Holdings is 1.55 times more volatile than Energisa SA. It trades about -0.13 of its total potential returns per unit of risk. Energisa SA is currently generating about 0.02 per unit of volatility. If you would invest  1,093  in Energisa SA on December 4, 2024 and sell it today you would earn a total of  1.00  from holding Energisa SA or generate 0.09% return on investment over 90 days.

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

Alfa Holdings SA  vs.  Energisa SA

Alfa Holdings SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alfa Holdings SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Energisa SA

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Energisa SA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with Alfa Holdings and Energisa

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

The idea behind Alfa Holdings SA and Energisa SA 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.