Correlation Between Companhia and Eneva SA
Can any of the company-specific risk be diversified away by investing in both Companhia and Eneva 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 Companhia and Eneva SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Companhia de Saneamento and Eneva SA, you can compare the effects of market volatilities on Companhia and Eneva 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 Companhia with a short position of Eneva SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Companhia and Eneva SA.
Diversification Opportunities for Companhia and Eneva SA
Very good diversification
The 3 months correlation between Companhia and Eneva is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Companhia de Saneamento and Eneva SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eneva SA and Companhia 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 Companhia de Saneamento are associated (or correlated) with Eneva SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eneva SA has no effect on the direction of Companhia i.e., Companhia and Eneva SA go up and down completely randomly.
Pair Corralation between Companhia and Eneva SA
Assuming the 90 days trading horizon Companhia de Saneamento is expected to generate 1.21 times more return on investment than Eneva SA. However, Companhia is 1.21 times more volatile than Eneva SA. It trades about 0.2 of its potential returns per unit of risk. Eneva SA is currently generating about -0.43 per unit of risk. If you would invest 9,173 in Companhia de Saneamento on August 28, 2024 and sell it today you would earn a total of 594.00 from holding Companhia de Saneamento or generate 6.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Companhia de Saneamento vs. Eneva SA
Performance |
| Timeline |
| Companhia de Saneamento |
| Eneva SA |
Companhia and Eneva SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Companhia and Eneva SA
The main advantage of trading using opposite Companhia and Eneva SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Companhia position performs unexpectedly, Eneva 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 Eneva SA will offset losses from the drop in Eneva SA's long position.| Companhia vs. CCR SA | Companhia vs. Centrais Eltricas Brasileiras | Companhia vs. Companhia Energtica de | Companhia vs. Centrais Eltricas Brasileiras |
| Eneva SA vs. BB Seguridade Participacoes | Eneva SA vs. Engie Brasil Energia | Eneva SA vs. CTEEP Companhia | Eneva SA vs. Itasa Investimentos |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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