Correlation Between Engie Brasil and Vulcabras Azaleia

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

Diversification Opportunities for Engie Brasil and Vulcabras Azaleia

0.78

Correlation Coefficient

Engie Brasil  Vulcabras Azaleia

Poor diversification

The 3 months correlation between Engie and Vulcabras is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Engie Brasil Energia and Vulcabras Azaleia SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vulcabras Azaleia 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 Vulcabras Azaleia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vulcabras Azaleia has no effect on the direction of Engie Brasil i.e., Engie Brasil and Vulcabras Azaleia go up and down completely randomly.

Pair Corralation between Engie Brasil and Vulcabras Azaleia

Assuming the 90 days trading horizon Engie Brasil Energia is expected to under-perform the Vulcabras Azaleia. But the stock apears to be less risky and, when comparing its historical volatility, Engie Brasil Energia is 1.75 times less risky than Vulcabras Azaleia. The stock trades about -0.23 of its potential returns per unit of risk. The Vulcabras Azaleia SA is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  1,736  in Vulcabras Azaleia SA on September 12, 2024 and sell it today you would lose (114.00) from holding Vulcabras Azaleia SA or give up 6.57% 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.  Vulcabras Azaleia 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.

Vulcabras Azaleia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vulcabras Azaleia SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Vulcabras Azaleia 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 Vulcabras Azaleia

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

The idea behind Engie Brasil Energia and Vulcabras Azaleia 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.