Correlation Between Companhia Energtica and Broadwind

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

By analyzing existing cross correlation between Companhia Energtica de and Broadwind, you can compare the effects of market volatilities on Companhia Energtica and Broadwind 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 Energtica with a short position of Broadwind. Check out your portfolio center. Please also check ongoing floating volatility patterns of Companhia Energtica and Broadwind.

Diversification Opportunities for Companhia Energtica and Broadwind

-0.12

Correlation Coefficient

Companhia Energtica  Broadwind

Good diversification

The 3 months correlation between Companhia and Broadwind is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Companhia Energtica de and Broadwind in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Broadwind and Companhia Energtica 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 Energtica de are associated (or correlated) with Broadwind. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Broadwind has no effect on the direction of Companhia Energtica i.e., Companhia Energtica and Broadwind go up and down completely randomly.

Pair Corralation between Companhia Energtica and Broadwind

Assuming the 90 days trading horizon Companhia Energtica de is expected to generate 1.14 times more return on investment than Broadwind. However, Companhia Energtica is 1.14 times more volatile than Broadwind. It trades about 0.0 of its potential returns per unit of risk. Broadwind is currently generating about -0.03 per unit of risk. If you would invest  199.00  in Companhia Energtica de on September 27, 2024 and sell it today you would lose (13.00) from holding Companhia Energtica de or give up 6.53% of portfolio value over 90 days.

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

Companhia Energtica de  vs.  Broadwind

Companhia Energtica

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Companhia Energtica de has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Companhia Energtica is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Broadwind

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Broadwind has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Companhia Energtica and Broadwind

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

The idea behind Companhia Energtica de and Broadwind 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.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.