Correlation Between EVN AG and Companhia Energtica

Can any of the company-specific risk be diversified away by investing in both EVN AG and Companhia Energtica 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 EVN AG and Companhia Energtica into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between EVN AG and Companhia Energtica de, you can compare the effects of market volatilities on EVN AG and Companhia Energtica 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 EVN AG with a short position of Companhia Energtica. Check out your portfolio center. Please also check ongoing floating volatility patterns of EVN AG and Companhia Energtica.

Diversification Opportunities for EVN AG and Companhia Energtica

-0.17

Correlation Coefficient

EVN AG  Companhia Energtica

Good diversification

The 3 months correlation between EVN and Companhia is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding EVN AG and Companhia Energtica de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Companhia Energtica and EVN AG 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 EVN AG are associated (or correlated) with Companhia Energtica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Companhia Energtica has no effect on the direction of EVN AG i.e., EVN AG and Companhia Energtica go up and down completely randomly.

Pair Corralation between EVN AG and Companhia Energtica

Assuming the 90 days horizon EVN AG is expected to under-perform the Companhia Energtica. But the stock apears to be less risky and, when comparing its historical volatility, EVN AG is 6.88 times less risky than Companhia Energtica. The stock trades about -0.28 of its potential returns per unit of risk. The Companhia Energtica de is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  100.00  in Companhia Energtica de on September 23, 2024 and sell it today you would earn a total of  89.00  from holding Companhia Energtica de or generate 89.0% return on investment over 90 days.

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

EVN AG  vs.  Companhia Energtica de

EVN AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EVN AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Companhia Energtica

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Companhia Energtica de are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, Companhia Energtica reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with EVN AG and Companhia Energtica

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

The idea behind EVN AG and Companhia Energtica de 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.