Correlation Between JBS ON and Rede Energia

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

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

Diversification Opportunities for JBS ON and Rede Energia

-0.81

Correlation Coefficient

JBS ON  Rede Energia

Pay attention - limited upside

The 3 months correlation between JBS and Rede is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding JBS ON NM and Rede Energia Participaes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rede Energia Participaes and JBS ON 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 JBS ON NM are associated (or correlated) with Rede Energia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rede Energia Participaes has no effect on the direction of JBS ON i.e., JBS ON and Rede Energia go up and down completely randomly.

Pair Corralation between JBS ON and Rede Energia

Assuming the 90 days trading horizon JBS ON NM is expected to generate 0.58 times more return on investment than Rede Energia. However, JBS ON NM is 1.73 times less risky than Rede Energia. It trades about 0.13 of its potential returns per unit of risk. Rede Energia Participaes is currently generating about 0.04 per unit of risk. If you would invest  1,872  in JBS ON NM on September 12, 2024 and sell it today you would earn a total of  1,970  from holding JBS ON NM or generate 105.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.5%
Values	Daily Returns

JBS ON NM  vs.  Rede Energia Participaes

JBS ON NM

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in JBS ON NM are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, JBS ON sustained solid returns over the last few months and may actually be approaching a breakup point.

Rede Energia Participaes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rede Energia Participaes has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Rede Energia is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with JBS ON and Rede Energia

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

The idea behind JBS ON NM and Rede Energia Participaes 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.