Correlation Between ENCE Energa and Laboratorios Farmaceuticos

Can any of the company-specific risk be diversified away by investing in both ENCE Energa and Laboratorios Farmaceuticos 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 ENCE Energa and Laboratorios Farmaceuticos into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ENCE Energa y and Laboratorios Farmaceuticos ROVI, you can compare the effects of market volatilities on ENCE Energa and Laboratorios Farmaceuticos 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 ENCE Energa with a short position of Laboratorios Farmaceuticos. Check out your portfolio center. Please also check ongoing floating volatility patterns of ENCE Energa and Laboratorios Farmaceuticos.

Diversification Opportunities for ENCE Energa and Laboratorios Farmaceuticos

0.32

Correlation Coefficient

ENCE Energa  Laboratorios Farmaceuticos

Weak diversification

The 3 months correlation between ENCE and Laboratorios is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding ENCE Energa y and Laboratorios Farmaceuticos ROV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Laboratorios Farmaceuticos and ENCE Energa 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 ENCE Energa y are associated (or correlated) with Laboratorios Farmaceuticos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Laboratorios Farmaceuticos has no effect on the direction of ENCE Energa i.e., ENCE Energa and Laboratorios Farmaceuticos go up and down completely randomly.

Pair Corralation between ENCE Energa and Laboratorios Farmaceuticos

Assuming the 90 days trading horizon ENCE Energa y is expected to generate 0.66 times more return on investment than Laboratorios Farmaceuticos. However, ENCE Energa y is 1.51 times less risky than Laboratorios Farmaceuticos. It trades about 0.05 of its potential returns per unit of risk. Laboratorios Farmaceuticos ROVI is currently generating about -0.12 per unit of risk. If you would invest  290.00  in ENCE Energa y on September 16, 2024 and sell it today you would earn a total of  11.00  from holding ENCE Energa y or generate 3.79% return on investment over 90 days.

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

ENCE Energa y  vs.  Laboratorios Farmaceuticos ROV

ENCE Energa y

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ENCE Energa y are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, ENCE Energa is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Laboratorios Farmaceuticos

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Laboratorios Farmaceuticos ROVI has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with ENCE Energa and Laboratorios Farmaceuticos

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

The idea behind ENCE Energa y and Laboratorios Farmaceuticos ROVI 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.