Correlation Between EuroSite Power and Energy Of

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

By analyzing existing cross correlation between EuroSite Power and Energy of Minas, you can compare the effects of market volatilities on EuroSite Power and Energy Of 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 EuroSite Power with a short position of Energy Of. Check out your portfolio center. Please also check ongoing floating volatility patterns of EuroSite Power and Energy Of.

Diversification Opportunities for EuroSite Power and Energy Of

0.22

Correlation Coefficient

EuroSite Power  Energy Of

Modest diversification

The 3 months correlation between EuroSite and Energy is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding EuroSite Power and Energy of Minas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy of Minas and EuroSite Power 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 EuroSite Power are associated (or correlated) with Energy Of. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy of Minas has no effect on the direction of EuroSite Power i.e., EuroSite Power and Energy Of go up and down completely randomly.

Pair Corralation between EuroSite Power and Energy Of

Given the investment horizon of 90 days EuroSite Power is expected to generate 3.26 times more return on investment than Energy Of. However, EuroSite Power is 3.26 times more volatile than Energy of Minas. It trades about 0.05 of its potential returns per unit of risk. Energy of Minas is currently generating about 0.03 per unit of risk. If you would invest  5.00  in EuroSite Power on September 4, 2024 and sell it today you would earn a total of  1.00  from holding EuroSite Power or generate 20.0% return on investment over 90 days.

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

EuroSite Power  vs.  Energy of Minas

EuroSite Power

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in EuroSite Power are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, EuroSite Power reported solid returns over the last few months and may actually be approaching a breakup point.

Energy of Minas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Energy of Minas has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with EuroSite Power and Energy Of

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

The idea behind EuroSite Power and Energy of Minas 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.

Check out your portfolio center.

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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.