Correlation Between Energisa and So Martinho
Can any of the company-specific risk be diversified away by investing in both Energisa and So Martinho 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 So Martinho into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Energisa SA and So Martinho SA, you can compare the effects of market volatilities on Energisa and So Martinho 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 So Martinho. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energisa and So Martinho.
Diversification Opportunities for Energisa and So Martinho
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Energisa and SMTO3 is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Energisa SA and So Martinho SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on So Martinho 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 So Martinho. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of So Martinho SA has no effect on the direction of Energisa i.e., Energisa and So Martinho go up and down completely randomly.
Pair Corralation between Energisa and So Martinho
Assuming the 90 days trading horizon Energisa is expected to generate 3.83 times less return on investment than So Martinho. But when comparing it to its historical volatility, Energisa SA is 1.38 times less risky than So Martinho. It trades about 0.01 of its potential returns per unit of risk. So Martinho SA is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 2,257 in So Martinho SA on September 3, 2024 and sell it today you would earn a total of 283.00 from holding So Martinho SA or generate 12.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.6% |
| Values | Daily Returns |
Energisa SA vs. So Martinho SA
Performance |
| Timeline |
| Energisa SA |
| So Martinho SA |
Energisa and So Martinho Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Energisa and So Martinho
The main advantage of trading using opposite Energisa and So Martinho positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Energisa position performs unexpectedly, So Martinho 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 So Martinho will offset losses from the drop in So Martinho's long position.| Energisa vs. Equatorial Energia SA | Energisa vs. CPFL Energia SA | Energisa vs. Eneva SA | Energisa vs. Companhia de Saneamento |
| So Martinho vs. SLC Agrcola SA | So Martinho vs. Cosan SA | So Martinho vs. Minerva SA | So Martinho vs. Randon SA Implementos |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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