Correlation Between Energisa and FDO DE
Can any of the company-specific risk be diversified away by investing in both Energisa and FDO DE 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 FDO DE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Energisa SA and FDO DE INVEST, you can compare the effects of market volatilities on Energisa and FDO DE 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 FDO DE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energisa and FDO DE.
Diversification Opportunities for Energisa and FDO DE
Very poor diversification
The 3 months correlation between Energisa and FDO is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Energisa SA and FDO DE INVEST in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FDO DE INVEST 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 FDO DE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FDO DE INVEST has no effect on the direction of Energisa i.e., Energisa and FDO DE go up and down completely randomly.
Pair Corralation between Energisa and FDO DE
Assuming the 90 days trading horizon Energisa SA is expected to under-perform the FDO DE. In addition to that, Energisa is 2.24 times more volatile than FDO DE INVEST. It trades about -0.04 of its total potential returns per unit of risk. FDO DE INVEST is currently generating about 0.04 per unit of volatility. If you would invest 862.00 in FDO DE INVEST on August 30, 2024 and sell it today you would earn a total of 6.00 from holding FDO DE INVEST or generate 0.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Energisa SA vs. FDO DE INVEST
Performance |
| Timeline |
| Energisa SA |
| FDO DE INVEST |
Energisa and FDO DE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Energisa and FDO DE
The main advantage of trading using opposite Energisa and FDO DE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Energisa position performs unexpectedly, FDO DE 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 FDO DE will offset losses from the drop in FDO DE'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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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