Correlation Between Energia Latina and HMC SA

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

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

Diversification Opportunities for Energia Latina and HMC SA

0.0

Correlation Coefficient

Energia Latina  HMC SA

Pay attention - limited upside

The 3 months correlation between Energia and HMC is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Energia Latina SA and HMC SA ADMINISTRADORA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HMC SA ADMINISTRADORA and Energia Latina 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 Energia Latina SA are associated (or correlated) with HMC SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HMC SA ADMINISTRADORA has no effect on the direction of Energia Latina i.e., Energia Latina and HMC SA go up and down completely randomly.

Pair Corralation between Energia Latina and HMC SA

If you would invest  65,749  in Energia Latina SA on September 5, 2024 and sell it today you would earn a total of  27,751  from holding Energia Latina SA or generate 42.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	61.68%
Values	Daily Returns

Energia Latina SA  vs.  HMC SA ADMINISTRADORA

Energia Latina SA

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Energia Latina SA are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong essential indicators, Energia Latina is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

HMC SA ADMINISTRADORA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HMC SA ADMINISTRADORA has generated negative risk-adjusted returns adding no value to fund investors. In spite of comparatively stable basic indicators, HMC SA is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Energia Latina and HMC SA

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

The idea behind Energia Latina SA and HMC SA ADMINISTRADORA 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.