Correlation Between EDP Energias and BBII
Can any of the company-specific risk be diversified away by investing in both EDP Energias and BBII 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 BBII into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EDP Energias and BBII, you can compare the effects of market volatilities on EDP Energias and BBII 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 BBII. Check out your portfolio center. Please also check ongoing floating volatility patterns of EDP Energias and BBII.
Diversification Opportunities for EDP Energias and BBII
-0.71 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between EDP and BBII is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding EDP Energias and BBII in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BBII 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 BBII. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BBII has no effect on the direction of EDP Energias i.e., EDP Energias and BBII go up and down completely randomly.
Pair Corralation between EDP Energias and BBII
Assuming the 90 days horizon EDP Energias is expected to under-perform the BBII. But the otc stock apears to be less risky and, when comparing its historical volatility, EDP Energias is 1.35 times less risky than BBII. The otc stock trades about -0.28 of its potential returns per unit of risk. The BBII is currently generating about 0.8 of returns per unit of risk over similar time horizon. If you would invest 108.00 in BBII on August 31, 2024 and sell it today you would earn a total of 84.00 from holding BBII or generate 77.78% 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. BBII
Performance |
| Timeline |
| EDP Energias |
| BBII |
EDP Energias and BBII Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EDP Energias and BBII
The main advantage of trading using opposite EDP Energias and BBII positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EDP Energias position performs unexpectedly, BBII 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 BBII will offset losses from the drop in BBII's long position.| EDP Energias vs. EDP Energias de | EDP Energias vs. EDP Renovaveis | EDP Energias vs. EON SE | EDP Energias vs. Endesa SA ADR |
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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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