Correlation Between Energisa and Loft II
Can any of the company-specific risk be diversified away by investing in both Energisa and Loft II 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 Loft II into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Energisa SA and Loft II Fundo, you can compare the effects of market volatilities on Energisa and Loft II 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 Loft II. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energisa and Loft II.
Diversification Opportunities for Energisa and Loft II
Poor diversification
The 3 months correlation between Energisa and Loft is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Energisa SA and Loft II Fundo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Loft II Fundo 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 Loft II. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Loft II Fundo has no effect on the direction of Energisa i.e., Energisa and Loft II go up and down completely randomly.
Pair Corralation between Energisa and Loft II
Assuming the 90 days trading horizon Energisa is expected to generate 3.61 times less return on investment than Loft II. But when comparing it to its historical volatility, Energisa SA is 2.52 times less risky than Loft II. It trades about 0.19 of its potential returns per unit of risk. Loft II Fundo is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 755.00 in Loft II Fundo on November 5, 2024 and sell it today you would earn a total of 145.00 from holding Loft II Fundo or generate 19.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 71.43% |
| Values | Daily Returns |
Energisa SA vs. Loft II Fundo
Performance |
| Timeline |
| Energisa SA |
| Loft II Fundo |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Weak
Energisa and Loft II Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Energisa and Loft II
The main advantage of trading using opposite Energisa and Loft II positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Energisa position performs unexpectedly, Loft II 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 Loft II will offset losses from the drop in Loft II's long position.| Energisa vs. Equatorial Energia SA | Energisa vs. CPFL Energia SA | Energisa vs. Eneva SA | Energisa vs. Companhia de Saneamento |
| Loft II vs. Domo Fundo de | Loft II vs. Aesapar Fundo de | Loft II vs. FUNDO DE INVESTIMENTO | Loft II vs. Ourinvest Jpp Fundo |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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