Correlation Between Energisa and Embraer SA
Can any of the company-specific risk be diversified away by investing in both Energisa and Embraer SA 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 Embraer SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Energisa SA and Embraer SA, you can compare the effects of market volatilities on Energisa and Embraer SA 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 Embraer SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energisa and Embraer SA.
Diversification Opportunities for Energisa and Embraer SA
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Energisa and Embraer is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Energisa SA and Embraer SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Embraer 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 Embraer SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Embraer SA has no effect on the direction of Energisa i.e., Energisa and Embraer SA go up and down completely randomly.
Pair Corralation between Energisa and Embraer SA
Assuming the 90 days trading horizon Energisa is expected to generate 27.17 times less return on investment than Embraer SA. But when comparing it to its historical volatility, Energisa SA is 1.41 times less risky than Embraer SA. It trades about 0.01 of its potential returns per unit of risk. Embraer SA is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 1,334 in Embraer SA on September 2, 2024 and sell it today you would earn a total of 4,479 from holding Embraer SA or generate 335.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.2% |
| Values | Daily Returns |
Energisa SA vs. Embraer SA
Performance |
| Timeline |
| Energisa SA |
| Embraer SA |
Energisa and Embraer SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Energisa and Embraer SA
The main advantage of trading using opposite Energisa and Embraer SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Energisa position performs unexpectedly, Embraer SA 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 Embraer SA will offset losses from the drop in Embraer SA'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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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