Correlation Between Engie Brasil and Porto Seguro

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

Diversification Opportunities for Engie Brasil and Porto Seguro

-0.87

Correlation Coefficient

Engie Brasil  Porto Seguro

Pay attention - limited upside

The 3 months correlation between Engie and Porto is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Engie Brasil Energia and Porto Seguro SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Porto Seguro SA 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 Porto Seguro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Porto Seguro SA has no effect on the direction of Engie Brasil i.e., Engie Brasil and Porto Seguro go up and down completely randomly.

Pair Corralation between Engie Brasil and Porto Seguro

Assuming the 90 days trading horizon Engie Brasil Energia is expected to under-perform the Porto Seguro. But the stock apears to be less risky and, when comparing its historical volatility, Engie Brasil Energia is 1.02 times less risky than Porto Seguro. The stock trades about -0.3 of its potential returns per unit of risk. The Porto Seguro SA is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  3,445  in Porto Seguro SA on September 4, 2024 and sell it today you would earn a total of  344.00  from holding Porto Seguro SA or generate 9.99% return on investment over 90 days.

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

Engie Brasil Energia  vs.  Porto Seguro 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.

Porto Seguro SA

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Porto Seguro SA are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Porto Seguro may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Engie Brasil and Porto Seguro

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

The idea behind Engie Brasil Energia and Porto Seguro 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.