Correlation Between Transmissora Aliana and Engie Brasil

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

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

Diversification Opportunities for Transmissora Aliana and Engie Brasil

0.82

Correlation Coefficient

Transmissora Aliana  Engie Brasil

Very poor diversification

The 3 months correlation between Transmissora and Engie is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Transmissora Aliana de 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 Transmissora Aliana 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 Transmissora Aliana de 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 Transmissora Aliana i.e., Transmissora Aliana and Engie Brasil go up and down completely randomly.

Pair Corralation between Transmissora Aliana and Engie Brasil

Assuming the 90 days trading horizon Transmissora Aliana de is expected to under-perform the Engie Brasil. In addition to that, Transmissora Aliana is 1.04 times more volatile than Engie Brasil Energia. It trades about -0.04 of its total potential returns per unit of risk. Engie Brasil Energia is currently generating about -0.01 per unit of volatility. If you would invest  3,768  in Engie Brasil Energia on November 29, 2024 and sell it today you would lose (48.00) from holding Engie Brasil Energia or give up 1.27% of portfolio value over 90 days.

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

Transmissora Aliana de  vs.  Engie Brasil Energia

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. Despite somewhat strong technical and fundamental indicators, Transmissora Aliana is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Engie Brasil Energia

Risk-Adjusted Performance

Very Weak

Over the last 90 days Engie Brasil Energia has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Engie Brasil is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Transmissora Aliana and Engie Brasil

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

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.