Correlation Between Rede Energia and Eternit SA
Can any of the company-specific risk be diversified away by investing in both Rede Energia and Eternit SA 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 Rede Energia and Eternit SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rede Energia Participaes and Eternit SA, you can compare the effects of market volatilities on Rede Energia and Eternit SA 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 Rede Energia with a short position of Eternit SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rede Energia and Eternit SA.
Diversification Opportunities for Rede Energia and Eternit SA
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Rede and Eternit is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Rede Energia Participaes and Eternit SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eternit SA and Rede 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 Rede Energia Participaes are associated (or correlated) with Eternit SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eternit SA has no effect on the direction of Rede Energia i.e., Rede Energia and Eternit SA go up and down completely randomly.
Pair Corralation between Rede Energia and Eternit SA
Assuming the 90 days trading horizon Rede Energia Participaes is expected to under-perform the Eternit SA. But the stock apears to be less risky and, when comparing its historical volatility, Rede Energia Participaes is 2.39 times less risky than Eternit SA. The stock trades about -0.01 of its potential returns per unit of risk. The Eternit SA is currently generating about 0.38 of returns per unit of risk over similar time horizon. If you would invest 512.00 in Eternit SA on August 30, 2024 and sell it today you would earn a total of 119.00 from holding Eternit SA or generate 23.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Rede Energia Participaes vs. Eternit SA
Performance |
| Timeline |
| Rede Energia Participaes |
| Eternit SA |
Rede Energia and Eternit SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rede Energia and Eternit SA
The main advantage of trading using opposite Rede Energia and Eternit SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rede Energia position performs unexpectedly, Eternit SA 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 Eternit SA will offset losses from the drop in Eternit SA's long position.| Rede Energia vs. CTEEP Companhia | Rede Energia vs. Empresa Metropolitana de | Rede Energia vs. Energisa SA | Rede Energia vs. Energisa SA |
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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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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