Correlation Between Consumers Energy and EDP Energias
Can any of the company-specific risk be diversified away by investing in both Consumers Energy 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 Consumers Energy and EDP Energias into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Consumers Energy and EDP Energias de, you can compare the effects of market volatilities on Consumers Energy 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 Consumers Energy with a short position of EDP Energias. Check out your portfolio center. Please also check ongoing floating volatility patterns of Consumers Energy and EDP Energias.
Diversification Opportunities for Consumers Energy and EDP Energias
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Consumers and EDP is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Consumers Energy 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 Consumers Energy 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 Consumers Energy 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 Consumers Energy i.e., Consumers Energy and EDP Energias go up and down completely randomly.
Pair Corralation between Consumers Energy and EDP Energias
Assuming the 90 days trading horizon Consumers Energy is expected to generate 0.55 times more return on investment than EDP Energias. However, Consumers Energy is 1.82 times less risky than EDP Energias. It trades about -0.07 of its potential returns per unit of risk. EDP Energias de is currently generating about -0.19 per unit of risk. If you would invest 8,350 in Consumers Energy on September 2, 2024 and sell it today you would lose (170.00) from holding Consumers Energy or give up 2.04% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Consumers Energy vs. EDP Energias de
Performance |
| Timeline |
| Consumers Energy |
| EDP Energias de |
Consumers Energy and EDP Energias Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Consumers Energy and EDP Energias
The main advantage of trading using opposite Consumers Energy and EDP Energias positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Consumers Energy 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.| Consumers Energy vs. Nextera Energy | Consumers Energy vs. Duke Energy | Consumers Energy vs. PGE Corp | Consumers Energy vs. Southern Company |
| EDP Energias vs. Nextera Energy | EDP Energias vs. Consumers Energy | EDP Energias vs. Duke Energy | EDP Energias vs. Centrais Electricas Brasileiras |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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