Correlation Between Eneva SA and Equatorial Energia

Can any of the company-specific risk be diversified away by investing in both Eneva SA and Equatorial Energia 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 Eneva SA and Equatorial Energia into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Eneva SA and Equatorial Energia

0.35

Correlation Coefficient

Eneva SA  Equatorial Energia

Weak diversification

The 3 months correlation between Eneva and Equatorial is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Eneva SA and Equatorial Energia SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equatorial Energia and Eneva SA 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 Eneva SA are associated (or correlated) with Equatorial Energia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equatorial Energia has no effect on the direction of Eneva SA i.e., Eneva SA and Equatorial Energia go up and down completely randomly.

Pair Corralation between Eneva SA and Equatorial Energia

Assuming the 90 days trading horizon Eneva SA is expected to under-perform the Equatorial Energia. But the stock apears to be less risky and, when comparing its historical volatility, Eneva SA is 1.09 times less risky than Equatorial Energia. The stock trades about -0.17 of its potential returns per unit of risk. The Equatorial Energia SA is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  3,411  in Equatorial Energia SA on August 31, 2024 and sell it today you would lose (350.00) from holding Equatorial Energia SA or give up 10.26% of portfolio value over 90 days.

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

Eneva SA  vs.  Equatorial Energia SA

Eneva SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eneva 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 December 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Equatorial Energia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Equatorial Energia SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Eneva SA and Equatorial Energia

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

The idea behind Eneva SA and Equatorial Energia 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.