Correlation Between Energisa and Magazine Luiza
Can any of the company-specific risk be diversified away by investing in both Energisa and Magazine Luiza 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 Magazine Luiza into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Energisa SA and Magazine Luiza SA, you can compare the effects of market volatilities on Energisa and Magazine Luiza 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 Magazine Luiza. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energisa and Magazine Luiza.
Diversification Opportunities for Energisa and Magazine Luiza
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Energisa and Magazine is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Energisa SA and Magazine Luiza SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magazine Luiza 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 Magazine Luiza. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magazine Luiza SA has no effect on the direction of Energisa i.e., Energisa and Magazine Luiza go up and down completely randomly.
Pair Corralation between Energisa and Magazine Luiza
Assuming the 90 days trading horizon Energisa SA is expected to under-perform the Magazine Luiza. But the stock apears to be less risky and, when comparing its historical volatility, Energisa SA is 2.41 times less risky than Magazine Luiza. The stock trades about -0.14 of its potential returns per unit of risk. The Magazine Luiza SA is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest 960.00 in Magazine Luiza SA on August 31, 2024 and sell it today you would lose (61.00) from holding Magazine Luiza SA or give up 6.35% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Energisa SA vs. Magazine Luiza SA
Performance |
| Timeline |
| Energisa SA |
| Magazine Luiza SA |
Energisa and Magazine Luiza Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Energisa and Magazine Luiza
The main advantage of trading using opposite Energisa and Magazine Luiza positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Energisa position performs unexpectedly, Magazine Luiza 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 Magazine Luiza will offset losses from the drop in Magazine Luiza's long position.| Energisa vs. Equatorial Energia SA | Energisa vs. CPFL Energia SA | Energisa vs. Eneva SA | Energisa vs. Companhia de Saneamento |
| Magazine Luiza vs. Engie Brasil Energia | Magazine Luiza vs. Fras le SA | Magazine Luiza vs. Energisa SA | Magazine Luiza vs. Clave Indices De |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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