Correlation Between Companhia Energetica and EDP Energias
Can any of the company-specific risk be diversified away by investing in both Companhia Energetica and EDP Energias 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 Companhia Energetica and EDP Energias into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Companhia Energetica de and EDP Energias de, you can compare the effects of market volatilities on Companhia Energetica and EDP Energias 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 Companhia Energetica with a short position of EDP Energias. Check out your portfolio center. Please also check ongoing floating volatility patterns of Companhia Energetica and EDP Energias.
Diversification Opportunities for Companhia Energetica and EDP Energias
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Companhia and EDP is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Companhia Energetica de and EDP Energias de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EDP Energias de and Companhia Energetica 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 Companhia Energetica de are associated (or correlated) with EDP Energias. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EDP Energias de has no effect on the direction of Companhia Energetica i.e., Companhia Energetica and EDP Energias go up and down completely randomly.
Pair Corralation between Companhia Energetica and EDP Energias
Considering the 90-day investment horizon Companhia Energetica de is expected to generate 1.06 times more return on investment than EDP Energias. However, Companhia Energetica is 1.06 times more volatile than EDP Energias de. It trades about 0.03 of its potential returns per unit of risk. EDP Energias de is currently generating about -0.16 per unit of risk. If you would invest 193.00 in Companhia Energetica de on September 1, 2024 and sell it today you would earn a total of 2.00 from holding Companhia Energetica de or generate 1.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Companhia Energetica de vs. EDP Energias de
Performance |
| Timeline |
| Companhia Energetica |
| EDP Energias de |
Companhia Energetica and EDP Energias Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Companhia Energetica and EDP Energias
The main advantage of trading using opposite Companhia Energetica and EDP Energias positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Companhia Energetica position performs unexpectedly, EDP Energias 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 EDP Energias will offset losses from the drop in EDP Energias' long position.| Companhia Energetica vs. NorthWestern | Companhia Energetica vs. Montauk Renewables | Companhia Energetica vs. Allete Inc | Companhia Energetica vs. Companhia Paranaense de |
| EDP Energias vs. RWE AG PK | EDP Energias vs. Iberdrola SA | EDP Energias vs. ENEL Societa per | EDP Energias vs. SSE PLC ADR |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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