Correlation Between Equatorial Energia and Raia Drogasil

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

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

Diversification Opportunities for Equatorial Energia and Raia Drogasil

0.46

Correlation Coefficient

Equatorial Energia  Raia Drogasil

Very weak diversification

The 3 months correlation between Equatorial and Raia is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Equatorial Energia SA and Raia Drogasil SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Raia Drogasil SA and Equatorial Energia 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 Energia SA are associated (or correlated) with Raia Drogasil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Raia Drogasil SA has no effect on the direction of Equatorial Energia i.e., Equatorial Energia and Raia Drogasil go up and down completely randomly.

Pair Corralation between Equatorial Energia and Raia Drogasil

Assuming the 90 days horizon Equatorial Energia SA is expected to under-perform the Raia Drogasil. But the pink sheet apears to be less risky and, when comparing its historical volatility, Equatorial Energia SA is 2.55 times less risky than Raia Drogasil. The pink sheet trades about -0.12 of its potential returns per unit of risk. The Raia Drogasil SA is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  478.00  in Raia Drogasil SA on September 13, 2024 and sell it today you would lose (36.00) from holding Raia Drogasil SA or give up 7.53% of portfolio value over 90 days.

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

Equatorial Energia SA  vs.  Raia Drogasil SA

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 weak performance in the last few months, the Stock's technical and fundamental indicators remain fairly 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.

Raia Drogasil SA

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Raia Drogasil SA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady essential indicators, Raia Drogasil may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Equatorial Energia and Raia Drogasil

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

The idea behind Equatorial Energia SA and Raia Drogasil 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.