Correlation Between BB Seguridade and Equatorial Energia

Can any of the company-specific risk be diversified away by investing in both BB Seguridade and Equatorial Energia 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 BB Seguridade and Equatorial Energia into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BB Seguridade Participacoes and Equatorial Energia SA, you can compare the effects of market volatilities on BB Seguridade and Equatorial Energia 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 BB Seguridade with a short position of Equatorial Energia. Check out your portfolio center. Please also check ongoing floating volatility patterns of BB Seguridade and Equatorial Energia.

Diversification Opportunities for BB Seguridade and Equatorial Energia

0.74

Correlation Coefficient

BB Seguridade  Equatorial Energia

Poor diversification

The 3 months correlation between BBSEY and Equatorial is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding BB Seguridade Participacoes and Equatorial Energia SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equatorial Energia and BB Seguridade 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 BB Seguridade Participacoes are associated (or correlated) with Equatorial Energia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equatorial Energia has no effect on the direction of BB Seguridade i.e., BB Seguridade and Equatorial Energia go up and down completely randomly.

Pair Corralation between BB Seguridade and Equatorial Energia

Assuming the 90 days horizon BB Seguridade Participacoes is expected to generate 0.69 times more return on investment than Equatorial Energia. However, BB Seguridade Participacoes is 1.44 times less risky than Equatorial Energia. It trades about -0.04 of its potential returns per unit of risk. Equatorial Energia SA is currently generating about -0.12 per unit of risk. If you would invest  650.00  in BB Seguridade Participacoes on September 13, 2024 and sell it today you would lose (39.00) from holding BB Seguridade Participacoes or give up 6.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

BB Seguridade Participacoes  vs.  Equatorial Energia SA

BB Seguridade Partic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BB Seguridade Participacoes has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, BB Seguridade is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Equatorial Energia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Equatorial Energia SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with BB Seguridade and Equatorial Energia

The main advantage of trading using opposite BB Seguridade and Equatorial Energia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BB Seguridade position performs unexpectedly, Equatorial Energia 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 Equatorial Energia will offset losses from the drop in Equatorial Energia's long position.

The idea behind BB Seguridade Participacoes and Equatorial Energia 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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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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.