Correlation Between Engie Brasil and Direcional Engenharia

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

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

Diversification Opportunities for Engie Brasil and Direcional Engenharia

0.65

Correlation Coefficient

Engie Brasil  Direcional Engenharia

Poor diversification

The 3 months correlation between Engie and Direcional is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Engie Brasil Energia and Direcional Engenharia SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direcional Engenharia and Engie Brasil 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 Engie Brasil Energia are associated (or correlated) with Direcional Engenharia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direcional Engenharia has no effect on the direction of Engie Brasil i.e., Engie Brasil and Direcional Engenharia go up and down completely randomly.

Pair Corralation between Engie Brasil and Direcional Engenharia

Assuming the 90 days trading horizon Engie Brasil Energia is expected to under-perform the Direcional Engenharia. But the stock apears to be less risky and, when comparing its historical volatility, Engie Brasil Energia is 2.51 times less risky than Direcional Engenharia. The stock trades about -0.14 of its potential returns per unit of risk. The Direcional Engenharia SA is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  3,068  in Direcional Engenharia SA on September 12, 2024 and sell it today you would earn a total of  18.00  from holding Direcional Engenharia SA or generate 0.59% return on investment over 90 days.

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

Engie Brasil Energia  vs.  Direcional Engenharia SA

Engie Brasil Energia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Engie Brasil Energia 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 basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Direcional Engenharia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Direcional Engenharia SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Direcional Engenharia is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Engie Brasil and Direcional Engenharia

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

The idea behind Engie Brasil Energia and Direcional Engenharia 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.

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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.