Correlation Between Sondotcnica Engenharia and Energisa
Can any of the company-specific risk be diversified away by investing in both Sondotcnica Engenharia 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 Sondotcnica Engenharia and Energisa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sondotcnica Engenharia de and Energisa SA, you can compare the effects of market volatilities on Sondotcnica Engenharia 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 Sondotcnica Engenharia with a short position of Energisa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sondotcnica Engenharia and Energisa.
Diversification Opportunities for Sondotcnica Engenharia and Energisa
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Sondotcnica and Energisa is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Sondotcnica Engenharia de and Energisa SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energisa SA and Sondotcnica Engenharia 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 Sondotcnica Engenharia de 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 Sondotcnica Engenharia i.e., Sondotcnica Engenharia and Energisa go up and down completely randomly.
Pair Corralation between Sondotcnica Engenharia and Energisa
Assuming the 90 days trading horizon Sondotcnica Engenharia de is expected to under-perform the Energisa. In addition to that, Sondotcnica Engenharia is 1.32 times more volatile than Energisa SA. It trades about -0.15 of its total potential returns per unit of risk. Energisa SA is currently generating about -0.07 per unit of volatility. If you would invest 4,633 in Energisa SA on September 2, 2024 and sell it today you would lose (612.00) from holding Energisa SA or give up 13.21% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sondotcnica Engenharia de vs. Energisa SA
Performance |
| Timeline |
| Sondotcnica Engenharia |
| Energisa SA |
Sondotcnica Engenharia and Energisa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sondotcnica Engenharia and Energisa
The main advantage of trading using opposite Sondotcnica Engenharia and Energisa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sondotcnica Engenharia 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 Sondotcnica Engenharia de 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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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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