Correlation Between Energisa and CME
Can any of the company-specific risk be diversified away by investing in both Energisa and CME 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 CME into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Energisa SA and CME Group, you can compare the effects of market volatilities on Energisa and CME 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 CME. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energisa and CME.
Diversification Opportunities for Energisa and CME
Pay attention - limited upside
The 3 months correlation between Energisa and CME is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Energisa SA and CME Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CME Group 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 CME. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CME Group has no effect on the direction of Energisa i.e., Energisa and CME go up and down completely randomly.
Pair Corralation between Energisa and CME
Assuming the 90 days trading horizon Energisa SA is expected to under-perform the CME. In addition to that, Energisa is 1.23 times more volatile than CME Group. It trades about -0.07 of its total potential returns per unit of risk. CME Group is currently generating about 0.09 per unit of volatility. If you would invest 26,000 in CME Group on September 2, 2024 and sell it today you would earn a total of 7,199 from holding CME Group or generate 27.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Energisa SA vs. CME Group
Performance |
| Timeline |
| Energisa SA |
| CME Group |
Energisa and CME Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Energisa and CME
The main advantage of trading using opposite Energisa and CME positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Energisa position performs unexpectedly, CME 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 CME will offset losses from the drop in CME's long position.| Energisa vs. Equatorial Energia SA | Energisa vs. CPFL Energia SA | Energisa vs. Eneva SA | Energisa vs. Companhia de Saneamento |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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