Correlation Between Rede Energia and Energisa Mato

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

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

Diversification Opportunities for Rede Energia and Energisa Mato

0.67

Correlation Coefficient

Rede Energia  Energisa Mato

Poor diversification

The 3 months correlation between Rede and Energisa is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Rede Energia Participaes and Energisa Mato Grosso in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energisa Mato Grosso and Rede 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 Rede Energia Participaes are associated (or correlated) with Energisa Mato. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energisa Mato Grosso has no effect on the direction of Rede Energia i.e., Rede Energia and Energisa Mato go up and down completely randomly.

Pair Corralation between Rede Energia and Energisa Mato

Assuming the 90 days trading horizon Rede Energia Participaes is expected to generate 2.16 times more return on investment than Energisa Mato. However, Rede Energia is 2.16 times more volatile than Energisa Mato Grosso. It trades about 0.04 of its potential returns per unit of risk. Energisa Mato Grosso is currently generating about 0.01 per unit of risk. If you would invest  444.00  in Rede Energia Participaes on September 14, 2024 and sell it today you would earn a total of  198.00  from holding Rede Energia Participaes or generate 44.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.2%
Values	Daily Returns

Rede Energia Participaes  vs.  Energisa Mato Grosso

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.

Energisa Mato Grosso

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Energisa Mato Grosso has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Rede Energia and Energisa Mato

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

The idea behind Rede Energia Participaes and Energisa Mato Grosso 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.