Correlation Between EDP Energias and Banco Comercial
Can any of the company-specific risk be diversified away by investing in both EDP Energias and Banco Comercial 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 EDP Energias and Banco Comercial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EDP Energias and Banco Comercial Portugues, you can compare the effects of market volatilities on EDP Energias and Banco Comercial 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 EDP Energias with a short position of Banco Comercial. Check out your portfolio center. Please also check ongoing floating volatility patterns of EDP Energias and Banco Comercial.
Diversification Opportunities for EDP Energias and Banco Comercial
-0.78 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between EDP and Banco is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding EDP Energias and Banco Comercial Portugues in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco Comercial Portugues and EDP Energias 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 EDP Energias are associated (or correlated) with Banco Comercial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco Comercial Portugues has no effect on the direction of EDP Energias i.e., EDP Energias and Banco Comercial go up and down completely randomly.
Pair Corralation between EDP Energias and Banco Comercial
Assuming the 90 days trading horizon EDP Energias is expected to under-perform the Banco Comercial. But the stock apears to be less risky and, when comparing its historical volatility, EDP Energias is 1.12 times less risky than Banco Comercial. The stock trades about -0.16 of its potential returns per unit of risk. The Banco Comercial Portugues is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 42.00 in Banco Comercial Portugues on August 29, 2024 and sell it today you would earn a total of 3.00 from holding Banco Comercial Portugues or generate 7.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
EDP Energias vs. Banco Comercial Portugues
Performance |
| Timeline |
| EDP Energias |
| Banco Comercial Portugues |
EDP Energias and Banco Comercial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EDP Energias and Banco Comercial
The main advantage of trading using opposite EDP Energias and Banco Comercial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EDP Energias position performs unexpectedly, Banco Comercial 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 Banco Comercial will offset losses from the drop in Banco Comercial's long position.| EDP Energias vs. Galp Energia SGPS | EDP Energias vs. Sonae SGPS SA | EDP Energias vs. Banco Comercial Portugues |
| Banco Comercial vs. Sonae SGPS SA | Banco Comercial vs. Galp Energia SGPS | Banco Comercial vs. EDP Energias | Banco Comercial vs. CTT Correios de |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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