Correlation Between Engie Brasil and Guararapes Confeces

Can any of the company-specific risk be diversified away by investing in both Engie Brasil and Guararapes Confeces 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 Guararapes Confeces 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 Guararapes Confeces SA, you can compare the effects of market volatilities on Engie Brasil and Guararapes Confeces 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 Guararapes Confeces. Check out your portfolio center. Please also check ongoing floating volatility patterns of Engie Brasil and Guararapes Confeces.

Diversification Opportunities for Engie Brasil and Guararapes Confeces

0.64

Correlation Coefficient

Engie Brasil  Guararapes Confeces

Poor diversification

The 3 months correlation between Engie and Guararapes is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Engie Brasil Energia and Guararapes Confeces SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guararapes Confeces 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 Guararapes Confeces. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guararapes Confeces has no effect on the direction of Engie Brasil i.e., Engie Brasil and Guararapes Confeces go up and down completely randomly.

Pair Corralation between Engie Brasil and Guararapes Confeces

Assuming the 90 days trading horizon Engie Brasil Energia is expected to generate 0.27 times more return on investment than Guararapes Confeces. However, Engie Brasil Energia is 3.72 times less risky than Guararapes Confeces. It trades about -0.24 of its potential returns per unit of risk. Guararapes Confeces SA is currently generating about -0.07 per unit of risk. If you would invest  4,270  in Engie Brasil Energia on September 26, 2024 and sell it today you would lose (708.00) from holding Engie Brasil Energia or give up 16.58% of portfolio value over 90 days.

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

Engie Brasil Energia  vs.  Guararapes Confeces 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 uncertain 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.

Guararapes Confeces

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Guararapes Confeces SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain 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.

Pair Trading with Engie Brasil and Guararapes Confeces

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

The idea behind Engie Brasil Energia and Guararapes Confeces 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.