Correlation Between Energisa and Petroreconcavo
Can any of the company-specific risk be diversified away by investing in both Energisa and Petroreconcavo 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 Petroreconcavo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Energisa SA and Petroreconcavo SA, you can compare the effects of market volatilities on Energisa and Petroreconcavo 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 Petroreconcavo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energisa and Petroreconcavo.
Diversification Opportunities for Energisa and Petroreconcavo
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Energisa and Petroreconcavo is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Energisa SA and Petroreconcavo SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petroreconcavo 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 Petroreconcavo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petroreconcavo SA has no effect on the direction of Energisa i.e., Energisa and Petroreconcavo go up and down completely randomly.
Pair Corralation between Energisa and Petroreconcavo
Assuming the 90 days trading horizon Energisa SA is expected to under-perform the Petroreconcavo. But the stock apears to be less risky and, when comparing its historical volatility, Energisa SA is 1.58 times less risky than Petroreconcavo. The stock trades about -0.14 of its potential returns per unit of risk. The Petroreconcavo SA is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 1,574 in Petroreconcavo SA on August 31, 2024 and sell it today you would earn a total of 46.00 from holding Petroreconcavo SA or generate 2.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Energisa SA vs. Petroreconcavo SA
Performance |
| Timeline |
| Energisa SA |
| Petroreconcavo SA |
Energisa and Petroreconcavo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Energisa and Petroreconcavo
The main advantage of trading using opposite Energisa and Petroreconcavo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Energisa position performs unexpectedly, Petroreconcavo 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 Petroreconcavo will offset losses from the drop in Petroreconcavo's long position.| Energisa vs. Equatorial Energia SA | Energisa vs. CPFL Energia SA | Energisa vs. Eneva SA | Energisa vs. Companhia de Saneamento |
| Petroreconcavo vs. Petro Rio SA | Petroreconcavo vs. Vamos Locao de | Petroreconcavo vs. SIMPAR SA | Petroreconcavo vs. Ambipar Participaes e |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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