Correlation Between Fundo De and Energisa
Can any of the company-specific risk be diversified away by investing in both Fundo De 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 Fundo De and Energisa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fundo De Investimento and Energisa SA, you can compare the effects of market volatilities on Fundo De 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 Fundo De with a short position of Energisa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fundo De and Energisa.
Diversification Opportunities for Fundo De and Energisa
Poor diversification
The 3 months correlation between Fundo and Energisa is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Fundo De Investimento and Energisa SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energisa SA and Fundo De 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 Fundo De Investimento 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 Fundo De i.e., Fundo De and Energisa go up and down completely randomly.
Pair Corralation between Fundo De and Energisa
Assuming the 90 days trading horizon Fundo De Investimento is expected to under-perform the Energisa. In addition to that, Fundo De is 1.1 times more volatile than Energisa SA. It trades about -0.03 of its total potential returns per unit of risk. Energisa SA is currently generating about 0.01 per unit of volatility. If you would invest 1,217 in Energisa SA on September 2, 2024 and sell it today you would lose (18.00) from holding Energisa SA or give up 1.48% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.8% |
| Values | Daily Returns |
Fundo De Investimento vs. Energisa SA
Performance |
| Timeline |
| Fundo De Investimento |
| Energisa SA |
Fundo De and Energisa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fundo De and Energisa
The main advantage of trading using opposite Fundo De and Energisa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fundo De 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 Fundo De Investimento 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.| Energisa vs. Energisa SA | Energisa vs. Equatorial Energia SA | Energisa vs. Energisa SA | Energisa vs. Transmissora Aliana de |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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