Correlation Between Energisa and Plano Plano

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

By analyzing existing cross correlation between Energisa SA and Plano Plano Desenvolvimento, you can compare the effects of market volatilities on Energisa and Plano Plano 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 Plano Plano. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energisa and Plano Plano.

Diversification Opportunities for Energisa and Plano Plano

-0.53

Correlation Coefficient

Energisa  Plano Plano

Excellent diversification

The 3 months correlation between Energisa and Plano is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Energisa SA and Plano Plano Desenvolvimento in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plano Plano Desenvol 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 Plano Plano. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plano Plano Desenvol has no effect on the direction of Energisa i.e., Energisa and Plano Plano go up and down completely randomly.

Pair Corralation between Energisa and Plano Plano

Assuming the 90 days trading horizon Energisa SA is expected to generate 0.66 times more return on investment than Plano Plano. However, Energisa SA is 1.53 times less risky than Plano Plano. It trades about -0.2 of its potential returns per unit of risk. Plano Plano Desenvolvimento is currently generating about -0.23 per unit of risk. If you would invest  4,316  in Energisa SA on September 3, 2024 and sell it today you would lose (295.00) from holding Energisa SA or give up 6.84% of portfolio value over 90 days.

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

Energisa SA  vs.  Plano Plano Desenvolvimento

Energisa SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Energisa SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's technical and fundamental indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Plano Plano Desenvol

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Plano Plano Desenvolvimento are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Plano Plano is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Energisa and Plano Plano

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

The idea behind Energisa SA and Plano Plano Desenvolvimento 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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.