Correlation Between XP Corporate and Energisa

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

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

Diversification Opportunities for XP Corporate and Energisa

0.81

Correlation Coefficient

XP Corporate  Energisa

Very poor diversification

The 3 months correlation between XPCM11 and Energisa is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding XP Corporate Maca and Energisa SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energisa SA and XP Corporate 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 XP Corporate Maca 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 XP Corporate i.e., XP Corporate and Energisa go up and down completely randomly.

Pair Corralation between XP Corporate and Energisa

Assuming the 90 days trading horizon XP Corporate Maca is expected to under-perform the Energisa. But the fund apears to be less risky and, when comparing its historical volatility, XP Corporate Maca is 1.13 times less risky than Energisa. The fund trades about -0.12 of its potential returns per unit of risk. The Energisa SA is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  3,980  in Energisa SA on October 11, 2024 and sell it today you would lose (300.00) from holding Energisa SA or give up 7.54% of portfolio value over 90 days.

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

XP Corporate Maca  vs.  Energisa SA

XP Corporate Maca

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days XP Corporate Maca has generated negative risk-adjusted returns adding no value to fund investors. Despite somewhat strong fundamental indicators, XP Corporate is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Energisa SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Energisa SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's technical and fundamental indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with XP Corporate and Energisa

The main advantage of trading using opposite XP Corporate and Energisa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if XP Corporate 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 XP Corporate Maca 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.