Correlation Between Equatorial Energia and Via Renewables

Can any of the company-specific risk be diversified away by investing in both Equatorial Energia and Via Renewables 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 Via Renewables 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 Via Renewables, you can compare the effects of market volatilities on Equatorial Energia and Via Renewables 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 Via Renewables. Check out your portfolio center. Please also check ongoing floating volatility patterns of Equatorial Energia and Via Renewables.

Diversification Opportunities for Equatorial Energia and Via Renewables

-0.61

Correlation Coefficient

Equatorial Energia  Via Renewables

Excellent diversification

The 3 months correlation between Equatorial and Via is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Equatorial Energia SA and Via Renewables in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Via Renewables 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 Via Renewables. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Via Renewables has no effect on the direction of Equatorial Energia i.e., Equatorial Energia and Via Renewables go up and down completely randomly.

Pair Corralation between Equatorial Energia and Via Renewables

Assuming the 90 days horizon Equatorial Energia SA is expected to under-perform the Via Renewables. In addition to that, Equatorial Energia is 2.26 times more volatile than Via Renewables. It trades about -0.12 of its total potential returns per unit of risk. Via Renewables is currently generating about 0.1 per unit of volatility. If you would invest  2,059  in Via Renewables on September 12, 2024 and sell it today you would earn a total of  151.00  from holding Via Renewables or generate 7.33% return on investment over 90 days.

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

Equatorial Energia SA  vs.  Via Renewables

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.

Via Renewables

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Via Renewables are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Via Renewables may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Equatorial Energia and Via Renewables

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

The idea behind Equatorial Energia SA and Via Renewables 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.