Correlation Between Companhia and Eneva SA

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

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

Diversification Opportunities for Companhia and Eneva SA

-0.42

Correlation Coefficient

Companhia  Eneva SA

Very good diversification

The 3 months correlation between Companhia and Eneva is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Companhia de Saneamento and Eneva SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eneva SA and Companhia 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 Companhia de Saneamento are associated (or correlated) with Eneva SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eneva SA has no effect on the direction of Companhia i.e., Companhia and Eneva SA go up and down completely randomly.

Pair Corralation between Companhia and Eneva SA

Assuming the 90 days trading horizon Companhia de Saneamento is expected to generate 1.05 times more return on investment than Eneva SA. However, Companhia is 1.05 times more volatile than Eneva SA. It trades about -0.01 of its potential returns per unit of risk. Eneva SA is currently generating about -0.19 per unit of risk. If you would invest  9,470  in Companhia de Saneamento on September 3, 2024 and sell it today you would lose (172.00) from holding Companhia de Saneamento or give up 1.82% of portfolio value over 90 days.

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

Companhia de Saneamento  vs.  Eneva SA

Companhia de Saneamento

Risk-Adjusted Performance

0 of 100

Very Weak

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

Eneva SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eneva SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak 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.

Pair Trading with Companhia and Eneva SA

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

The idea behind Companhia de Saneamento and Eneva 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.