Correlation Between Equatorial Par and Rede Energia

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

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

Diversification Opportunities for Equatorial Par and Rede Energia

0.68

Correlation Coefficient

Equatorial Par  Rede Energia

Poor diversification

The 3 months correlation between Equatorial and Rede is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Equatorial Par Distribuidora and Rede Energia Participaes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rede Energia Participaes and Equatorial Par 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 Equatorial Par Distribuidora are associated (or correlated) with Rede Energia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rede Energia Participaes has no effect on the direction of Equatorial Par i.e., Equatorial Par and Rede Energia go up and down completely randomly.

Pair Corralation between Equatorial Par and Rede Energia

Assuming the 90 days trading horizon Equatorial Par Distribuidora is expected to under-perform the Rede Energia. In addition to that, Equatorial Par is 1.83 times more volatile than Rede Energia Participaes. It trades about -0.07 of its total potential returns per unit of risk. Rede Energia Participaes is currently generating about -0.11 per unit of volatility. If you would invest  680.00  in Rede Energia Participaes on September 12, 2024 and sell it today you would lose (42.00) from holding Rede Energia Participaes or give up 6.18% of portfolio value over 90 days.

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

Equatorial Par Distribuidora  vs.  Rede Energia Participaes

Equatorial Par Distr

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Equatorial Par Distribuidora 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.

Rede Energia Participaes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rede Energia Participaes has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Rede Energia is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Equatorial Par and Rede Energia

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

The idea behind Equatorial Par Distribuidora and Rede Energia Participaes 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.