Correlation Between Energisa and Itau Fundo
Can any of the company-specific risk be diversified away by investing in both Energisa and Itau Fundo 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 Energisa and Itau Fundo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Energisa SA and Itau Fundo De, you can compare the effects of market volatilities on Energisa and Itau Fundo 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 Energisa with a short position of Itau Fundo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energisa and Itau Fundo.
Diversification Opportunities for Energisa and Itau Fundo
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Energisa and Itau is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Energisa SA and Itau Fundo De in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Itau Fundo De and Energisa 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 Energisa SA are associated (or correlated) with Itau Fundo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Itau Fundo De has no effect on the direction of Energisa i.e., Energisa and Itau Fundo go up and down completely randomly.
Pair Corralation between Energisa and Itau Fundo
Assuming the 90 days trading horizon Energisa SA is expected to under-perform the Itau Fundo. In addition to that, Energisa is 1.59 times more volatile than Itau Fundo De. It trades about -0.21 of its total potential returns per unit of risk. Itau Fundo De is currently generating about -0.21 per unit of volatility. If you would invest 9,886 in Itau Fundo De on September 7, 2024 and sell it today you would lose (1,086) from holding Itau Fundo De or give up 10.99% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Energisa SA vs. Itau Fundo De
Performance |
Timeline |
Energisa SA |
Itau Fundo De |
Energisa and Itau Fundo Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Energisa and Itau Fundo
The main advantage of trading using opposite Energisa and Itau Fundo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Energisa position performs unexpectedly, Itau Fundo 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 Itau Fundo will offset losses from the drop in Itau Fundo's long position.Energisa vs. Equatorial Energia SA | Energisa vs. CPFL Energia SA | Energisa vs. Eneva SA | Energisa vs. Companhia de Saneamento |
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Check out your portfolio center.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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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