Correlation Between Loft II and Energisa

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Can any of the company-specific risk be diversified away by investing in both Loft II and Energisa 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 Loft II and Energisa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Loft II Fundo and Energisa SA, you can compare the effects of market volatilities on Loft II and Energisa 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 Loft II with a short position of Energisa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Loft II and Energisa.

Diversification Opportunities for Loft II and Energisa

0.84
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Loft and Energisa is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Loft II Fundo and Energisa SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energisa SA and Loft II 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 Loft II Fundo are associated (or correlated) with Energisa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energisa SA has no effect on the direction of Loft II i.e., Loft II and Energisa go up and down completely randomly.

Pair Corralation between Loft II and Energisa

Assuming the 90 days trading horizon Loft II Fundo is expected to generate 3.06 times more return on investment than Energisa. However, Loft II is 3.06 times more volatile than Energisa SA. It trades about 0.07 of its potential returns per unit of risk. Energisa SA is currently generating about -0.09 per unit of risk. If you would invest  898.00  in Loft II Fundo on August 24, 2024 and sell it today you would earn a total of  41.00  from holding Loft II Fundo or generate 4.57% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Loft II Fundo  vs.  Energisa SA

 Performance 
       Timeline  
Loft II Fundo 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Loft II Fundo has generated negative risk-adjusted returns adding no value to fund investors. Despite weak performance in the last few months, the Fund's basic indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the fund investors.
Energisa SA 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Energisa SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Preferred Stock's basic indicators remain comparatively stable which may send shares a bit higher in December 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Loft II and Energisa Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Loft II and Energisa

The main advantage of trading using opposite Loft II and Energisa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Loft II position performs unexpectedly, Energisa 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 Energisa will offset losses from the drop in Energisa's long position.
The idea behind Loft II Fundo and Energisa SA pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.

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