Correlation Between Hites SA and Energia Latina

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

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

Diversification Opportunities for Hites SA and Energia Latina

-0.91

Correlation Coefficient

Hites SA  Energia Latina

Pay attention - limited upside

The 3 months correlation between Hites and Energia is -0.91. Overlapping area represents the amount of risk that can be diversified away by holding Hites SA and Energia Latina SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energia Latina SA and Hites SA 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 Hites SA are associated (or correlated) with Energia Latina. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energia Latina SA has no effect on the direction of Hites SA i.e., Hites SA and Energia Latina go up and down completely randomly.

Pair Corralation between Hites SA and Energia Latina

Assuming the 90 days trading horizon Hites SA is expected to under-perform the Energia Latina. In addition to that, Hites SA is 5.84 times more volatile than Energia Latina SA. It trades about -0.2 of its total potential returns per unit of risk. Energia Latina SA is currently generating about 0.13 per unit of volatility. If you would invest  90,000  in Energia Latina SA on September 5, 2024 and sell it today you would earn a total of  3,500  from holding Energia Latina SA or generate 3.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	88.14%
Values	Daily Returns

Hites SA  vs.  Energia Latina SA

Hites SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hites SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Energia Latina SA

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Energia Latina SA are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong essential indicators, Energia Latina is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Hites SA and Energia Latina

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

The idea behind Hites SA and Energia Latina 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.