Correlation Between Equatorial Energia and Rede Energia
Can any of the company-specific risk be diversified away by investing in both Equatorial Energia and Rede Energia 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 Equatorial Energia and Rede Energia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Equatorial Energia SA and Rede Energia Participaes, you can compare the effects of market volatilities on Equatorial Energia and Rede Energia 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 Equatorial Energia with a short position of Rede Energia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Equatorial Energia and Rede Energia.
Diversification Opportunities for Equatorial Energia and Rede Energia
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Equatorial and Rede is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Equatorial Energia SA and Rede Energia Participaes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rede Energia Participaes and Equatorial Energia 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 Equatorial Energia SA are associated (or correlated) with Rede Energia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rede Energia Participaes has no effect on the direction of Equatorial Energia i.e., Equatorial Energia and Rede Energia go up and down completely randomly.
Pair Corralation between Equatorial Energia and Rede Energia
Assuming the 90 days trading horizon Equatorial Energia is expected to generate 1.93 times less return on investment than Rede Energia. In addition to that, Equatorial Energia is 1.21 times more volatile than Rede Energia Participaes. It trades about 0.11 of its total potential returns per unit of risk. Rede Energia Participaes is currently generating about 0.26 per unit of volatility. If you would invest 631.00 in Rede Energia Participaes on November 27, 2024 and sell it today you would earn a total of 48.00 from holding Rede Energia Participaes or generate 7.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Equatorial Energia SA vs. Rede Energia Participaes
Performance |
| Timeline |
| Equatorial Energia |
| Rede Energia Participaes |
Equatorial Energia and Rede Energia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Equatorial Energia and Rede Energia
The main advantage of trading using opposite Equatorial Energia and Rede Energia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equatorial Energia position performs unexpectedly, Rede Energia 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 Rede Energia will offset losses from the drop in Rede Energia's long position.| Equatorial Energia vs. Localiza Rent a | Equatorial Energia vs. Raia Drogasil SA | Equatorial Energia vs. Engie Brasil Energia | Equatorial Energia vs. Lojas Renner SA |
| Rede Energia vs. Empresa Metropolitana de | Rede Energia vs. Energisa SA | Rede Energia vs. Energisa SA | Rede Energia vs. Companhiade Eletricidade do |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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