Correlation Between Energisa and GAEC Educacao
Can any of the company-specific risk be diversified away by investing in both Energisa and GAEC Educacao 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 GAEC Educacao into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Energisa SA and GAEC Educacao SA, you can compare the effects of market volatilities on Energisa and GAEC Educacao 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 GAEC Educacao. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energisa and GAEC Educacao.
Diversification Opportunities for Energisa and GAEC Educacao
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Energisa and GAEC is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Energisa SA and GAEC Educacao SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GAEC Educacao SA 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 GAEC Educacao. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GAEC Educacao SA has no effect on the direction of Energisa i.e., Energisa and GAEC Educacao go up and down completely randomly.
Pair Corralation between Energisa and GAEC Educacao
Assuming the 90 days trading horizon Energisa SA is expected to generate 0.36 times more return on investment than GAEC Educacao. However, Energisa SA is 2.8 times less risky than GAEC Educacao. It trades about -0.07 of its potential returns per unit of risk. GAEC Educacao SA is currently generating about -0.03 per unit of risk. If you would invest 5,290 in Energisa SA on August 31, 2024 and sell it today you would lose (1,231) from holding Energisa SA or give up 23.27% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.2% |
| Values | Daily Returns |
Energisa SA vs. GAEC Educacao SA
Performance |
| Timeline |
| Energisa SA |
| GAEC Educacao SA |
Energisa and GAEC Educacao Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Energisa and GAEC Educacao
The main advantage of trading using opposite Energisa and GAEC Educacao positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Energisa position performs unexpectedly, GAEC Educacao 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 GAEC Educacao will offset losses from the drop in GAEC Educacao's long position.| Energisa vs. Equatorial Energia SA | Energisa vs. CPFL Energia SA | Energisa vs. Eneva SA | Energisa vs. Companhia de Saneamento |
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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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