Correlation Between Fundo Investec and Energisa

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

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

Diversification Opportunities for Fundo Investec and Energisa

0.45

Correlation Coefficient

Fundo Investec  Energisa

Very weak diversification

The 3 months correlation between Fundo and Energisa is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Fundo Investec IMB and Energisa SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energisa SA and Fundo Investec 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 Fundo Investec IMB 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 Fundo Investec i.e., Fundo Investec and Energisa go up and down completely randomly.

Pair Corralation between Fundo Investec and Energisa

Assuming the 90 days trading horizon Fundo Investec IMB is expected to generate 1.61 times more return on investment than Energisa. However, Fundo Investec is 1.61 times more volatile than Energisa SA. It trades about 0.1 of its potential returns per unit of risk. Energisa SA is currently generating about 0.09 per unit of risk. If you would invest  4,903  in Fundo Investec IMB on December 25, 2024 and sell it today you would earn a total of  837.00  from holding Fundo Investec IMB or generate 17.07% return on investment over 90 days.

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

Fundo Investec IMB  vs.  Energisa SA

Fundo Investec IMB

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fundo Investec IMB are ranked lower than 7 (%) of all funds and portfolios of funds over the last 90 days. Despite somewhat weak essential indicators, Fundo Investec sustained solid returns over the last few months and may actually be approaching a breakup point.

Energisa SA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Energisa SA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain technical and fundamental indicators, Energisa may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Fundo Investec and Energisa

The main advantage of trading using opposite Fundo Investec and Energisa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fundo Investec 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 Fundo Investec IMB 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.

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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.