Correlation Between Companhia and Engie Brasil
Can any of the company-specific risk be diversified away by investing in both Companhia 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 Companhia and Engie Brasil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Companhia de Saneamento and Engie Brasil Energia, you can compare the effects of market volatilities on Companhia 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 Companhia with a short position of Engie Brasil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Companhia and Engie Brasil.
Diversification Opportunities for Companhia and Engie Brasil
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Companhia and Engie is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Companhia de Saneamento 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 Companhia 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 de Saneamento 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 Companhia i.e., Companhia and Engie Brasil go up and down completely randomly.
Pair Corralation between Companhia and Engie Brasil
Assuming the 90 days trading horizon Companhia de Saneamento is expected to generate 1.17 times more return on investment than Engie Brasil. However, Companhia is 1.17 times more volatile than Engie Brasil Energia. It trades about 0.21 of its potential returns per unit of risk. Engie Brasil Energia is currently generating about -0.24 per unit of risk. If you would invest 2,304 in Companhia de Saneamento on August 30, 2024 and sell it today you would earn a total of 260.00 from holding Companhia de Saneamento or generate 11.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Companhia de Saneamento vs. Engie Brasil Energia
Performance |
| Timeline |
| Companhia de Saneamento |
| Engie Brasil Energia |
Companhia and Engie Brasil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Companhia and Engie Brasil
The main advantage of trading using opposite Companhia and Engie Brasil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Companhia 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.| Companhia vs. CTEEP Companhia | Companhia vs. Companhia de Saneamento | Companhia vs. Companhia Paranaense de | Companhia vs. Companhia de Saneamento |
| Engie Brasil vs. WEG SA | Engie Brasil vs. Transmissora Aliana de | Engie Brasil vs. Fleury SA | Engie Brasil vs. BB Seguridade Participacoes |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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