Correlation Between Energisa and Raytheon Technologies
Can any of the company-specific risk be diversified away by investing in both Energisa and Raytheon Technologies 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 Raytheon Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Energisa SA and Raytheon Technologies, you can compare the effects of market volatilities on Energisa and Raytheon Technologies 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 Raytheon Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energisa and Raytheon Technologies.
Diversification Opportunities for Energisa and Raytheon Technologies
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Energisa and Raytheon is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Energisa SA and Raytheon Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Raytheon Technologies 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 Raytheon Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Raytheon Technologies has no effect on the direction of Energisa i.e., Energisa and Raytheon Technologies go up and down completely randomly.
Pair Corralation between Energisa and Raytheon Technologies
Assuming the 90 days trading horizon Energisa SA is expected to under-perform the Raytheon Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Energisa SA is 1.01 times less risky than Raytheon Technologies. The stock trades about -0.14 of its potential returns per unit of risk. The Raytheon Technologies is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 11,653 in Raytheon Technologies on August 31, 2024 and sell it today you would earn a total of 236.00 from holding Raytheon Technologies or generate 2.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Energisa SA vs. Raytheon Technologies
Performance |
| Timeline |
| Energisa SA |
| Raytheon Technologies |
Energisa and Raytheon Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Energisa and Raytheon Technologies
The main advantage of trading using opposite Energisa and Raytheon Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Energisa position performs unexpectedly, Raytheon Technologies 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 Raytheon Technologies will offset losses from the drop in Raytheon Technologies' long position.| Energisa vs. Equatorial Energia SA | Energisa vs. CPFL Energia SA | Energisa vs. Eneva SA | Energisa vs. Companhia de Saneamento |
| Raytheon Technologies vs. Taurus Armas SA | Raytheon Technologies vs. Fras le SA | Raytheon Technologies vs. Western Digital | Raytheon Technologies vs. Energisa SA |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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