Correlation Between Energisa and AES Brasil
Can any of the company-specific risk be diversified away by investing in both Energisa and AES 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 Energisa and AES Brasil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Energisa SA and AES Brasil Energia, you can compare the effects of market volatilities on Energisa and AES 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 Energisa with a short position of AES Brasil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energisa and AES Brasil.
Diversification Opportunities for Energisa and AES Brasil
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Energisa and AES is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Energisa SA and AES Brasil Energia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AES Brasil Energia and Energisa 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 Energisa SA are associated (or correlated) with AES Brasil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AES Brasil Energia has no effect on the direction of Energisa i.e., Energisa and AES Brasil go up and down completely randomly.
Pair Corralation between Energisa and AES Brasil
Assuming the 90 days trading horizon Energisa SA is expected to generate 0.39 times more return on investment than AES Brasil. However, Energisa SA is 2.56 times less risky than AES Brasil. It trades about -0.17 of its potential returns per unit of risk. AES Brasil Energia is currently generating about -0.19 per unit of risk. If you would invest 4,730 in Energisa SA on August 31, 2024 and sell it today you would lose (671.00) from holding Energisa SA or give up 14.19% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 72.58% |
| Values | Daily Returns |
Energisa SA vs. AES Brasil Energia
Performance |
| Timeline |
| Energisa SA |
| AES Brasil Energia |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Energisa and AES Brasil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Energisa and AES Brasil
The main advantage of trading using opposite Energisa and AES Brasil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Energisa position performs unexpectedly, AES 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 AES Brasil will offset losses from the drop in AES Brasil's long position.| Energisa vs. Equatorial Energia SA | Energisa vs. CPFL Energia SA | Energisa vs. Eneva SA | Energisa vs. Companhia de Saneamento |
| AES Brasil vs. CTEEP Companhia | AES Brasil vs. Transmissora Aliana de | AES Brasil vs. Engie Brasil Energia | AES 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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