Correlation Between EDP Energias and Companhia Energetica
Can any of the company-specific risk be diversified away by investing in both EDP Energias and Companhia Energetica 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 Companhia Energetica into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EDP Energias de and Companhia Energetica de, you can compare the effects of market volatilities on EDP Energias and Companhia Energetica 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 Companhia Energetica. Check out your portfolio center. Please also check ongoing floating volatility patterns of EDP Energias and Companhia Energetica.
Diversification Opportunities for EDP Energias and Companhia Energetica
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between EDP and Companhia is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding EDP Energias de and Companhia Energetica de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Companhia Energetica 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 de are associated (or correlated) with Companhia Energetica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Companhia Energetica has no effect on the direction of EDP Energias i.e., EDP Energias and Companhia Energetica go up and down completely randomly.
Pair Corralation between EDP Energias and Companhia Energetica
Assuming the 90 days horizon EDP Energias de is expected to under-perform the Companhia Energetica. But the pink sheet apears to be less risky and, when comparing its historical volatility, EDP Energias de is 1.06 times less risky than Companhia Energetica. The pink sheet trades about -0.16 of its potential returns per unit of risk. The Companhia Energetica de is currently generating about 0.03 of returns per unit of risk over similar time horizon. 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 |
EDP Energias de vs. Companhia Energetica de
Performance |
| Timeline |
| EDP Energias de |
| Companhia Energetica |
EDP Energias and Companhia Energetica Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EDP Energias and Companhia Energetica
The main advantage of trading using opposite EDP Energias and Companhia Energetica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EDP Energias position performs unexpectedly, Companhia Energetica 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 Companhia Energetica will offset losses from the drop in Companhia Energetica's long position.| EDP Energias vs. RWE AG PK | EDP Energias vs. Iberdrola SA | EDP Energias vs. ENEL Societa per | EDP Energias vs. SSE PLC ADR |
| Companhia Energetica vs. NorthWestern | Companhia Energetica vs. Montauk Renewables | Companhia Energetica vs. Allete Inc | Companhia Energetica vs. Companhia Paranaense 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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