Correlation Between EDP Renovaveis and Spark Power

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

By analyzing existing cross correlation between EDP Renovaveis and Spark Power Group, you can compare the effects of market volatilities on EDP Renovaveis and Spark Power 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 EDP Renovaveis with a short position of Spark Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of EDP Renovaveis and Spark Power.

Diversification Opportunities for EDP Renovaveis and Spark Power

0.92

Correlation Coefficient

EDP Renovaveis  Spark Power

Almost no diversification

The 3 months correlation between EDP and Spark is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding EDP Renovaveis and Spark Power Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spark Power Group and EDP Renovaveis 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 EDP Renovaveis are associated (or correlated) with Spark Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spark Power Group has no effect on the direction of EDP Renovaveis i.e., EDP Renovaveis and Spark Power go up and down completely randomly.

Pair Corralation between EDP Renovaveis and Spark Power

If you would invest  27.00  in Spark Power Group on August 31, 2024 and sell it today you would earn a total of  0.00  from holding Spark Power Group or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	4.55%
Values	Daily Returns

EDP Renovaveis  vs.  Spark Power Group

EDP Renovaveis

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EDP Renovaveis has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Spark Power Group

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with EDP Renovaveis and Spark Power

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

The idea behind EDP Renovaveis and Spark Power Group 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.