Correlation Between EDP Energias and EDP Renovaveis
Can any of the company-specific risk be diversified away by investing in both EDP Energias and EDP Renovaveis 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 EDP Renovaveis into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EDP Energias and EDP Renovaveis, you can compare the effects of market volatilities on EDP Energias and EDP Renovaveis 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 EDP Renovaveis. Check out your portfolio center. Please also check ongoing floating volatility patterns of EDP Energias and EDP Renovaveis.
Diversification Opportunities for EDP Energias and EDP Renovaveis
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between EDP and EDP is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding EDP Energias and EDP Renovaveis in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EDP Renovaveis 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 EDP Renovaveis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EDP Renovaveis has no effect on the direction of EDP Energias i.e., EDP Energias and EDP Renovaveis go up and down completely randomly.
Pair Corralation between EDP Energias and EDP Renovaveis
Assuming the 90 days trading horizon EDP Energias is expected to under-perform the EDP Renovaveis. But the stock apears to be less risky and, when comparing its historical volatility, EDP Energias is 2.39 times less risky than EDP Renovaveis. The stock trades about -0.02 of its potential returns per unit of risk. The EDP Renovaveis is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 1,326 in EDP Renovaveis on September 2, 2024 and sell it today you would lose (218.00) from holding EDP Renovaveis or give up 16.44% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
EDP Energias vs. EDP Renovaveis
Performance |
| Timeline |
| EDP Energias |
| EDP Renovaveis |
EDP Energias and EDP Renovaveis Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EDP Energias and EDP Renovaveis
The main advantage of trading using opposite EDP Energias and EDP Renovaveis positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EDP Energias position performs unexpectedly, EDP Renovaveis 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 Renovaveis will offset losses from the drop in EDP Renovaveis' long position.| EDP Energias vs. EDP Renovaveis | EDP Energias vs. Galp Energia SGPS | EDP Energias vs. Sonae SGPS SA | EDP Energias vs. Banco Comercial Portugues |
| EDP Renovaveis vs. EDP Energias | EDP Renovaveis vs. Galp Energia SGPS | EDP Renovaveis vs. Sonae SGPS SA | EDP Renovaveis vs. Altri SGPS SA |
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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