Correlation Between South Jersey and EDP Energias
Can any of the company-specific risk be diversified away by investing in both South Jersey and EDP Energias 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 South Jersey and EDP Energias into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between South Jersey Industries and EDP Energias de, you can compare the effects of market volatilities on South Jersey and EDP Energias 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 South Jersey with a short position of EDP Energias. Check out your portfolio center. Please also check ongoing floating volatility patterns of South Jersey and EDP Energias.
Diversification Opportunities for South Jersey and EDP Energias
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between South and EDP is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding South Jersey Industries and EDP Energias de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EDP Energias de and South Jersey 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 South Jersey Industries are associated (or correlated) with EDP Energias. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EDP Energias de has no effect on the direction of South Jersey i.e., South Jersey and EDP Energias go up and down completely randomly.
Pair Corralation between South Jersey and EDP Energias
Given the investment horizon of 90 days South Jersey Industries is expected to under-perform the EDP Energias. But the stock apears to be less risky and, when comparing its historical volatility, South Jersey Industries is 4.49 times less risky than EDP Energias. The stock trades about -0.09 of its potential returns per unit of risk. The EDP Energias de is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 4,510 in EDP Energias de on September 3, 2024 and sell it today you would lose (905.00) from holding EDP Energias de or give up 20.07% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 11.11% |
| Values | Daily Returns |
South Jersey Industries vs. EDP Energias de
Performance |
| Timeline |
| South Jersey Industries |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| EDP Energias de |
South Jersey and EDP Energias Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with South Jersey and EDP Energias
The main advantage of trading using opposite South Jersey and EDP Energias positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if South Jersey position performs unexpectedly, EDP Energias 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 EDP Energias will offset losses from the drop in EDP Energias' long position.| South Jersey vs. Hurco Companies | South Jersey vs. Marfrig Global Foods | South Jersey vs. Mayfair Gold Corp | South Jersey vs. Chester Mining |
| EDP Energias vs. Energy of Minas | EDP Energias vs. The AES | EDP Energias vs. Sempra Energy | EDP Energias vs. Iberdrola SA |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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