Correlation Between Virtus Investment and Companhia Energtica

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

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

Diversification Opportunities for Virtus Investment and Companhia Energtica

0.2

Correlation Coefficient

Virtus Investment  Companhia Energtica

Modest diversification

The 3 months correlation between Virtus and Companhia is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Virtus Investment Partners and Companhia Energtica de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Companhia Energtica and Virtus Investment 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 Virtus Investment Partners 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 Virtus Investment i.e., Virtus Investment and Companhia Energtica go up and down completely randomly.

Pair Corralation between Virtus Investment and Companhia Energtica

Assuming the 90 days horizon Virtus Investment is expected to generate 6.51 times less return on investment than Companhia Energtica. But when comparing it to its historical volatility, Virtus Investment Partners is 5.08 times less risky than Companhia Energtica. It trades about 0.1 of its potential returns per unit of risk. 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 Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Virtus Investment Partners  vs.  Companhia Energtica de

Virtus Investment

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Virtus Investment Partners are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Virtus Investment reported solid returns over the last few months and may actually be approaching a breakup point.

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 Virtus Investment and Companhia Energtica

The main advantage of trading using opposite Virtus Investment and Companhia Energtica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Virtus Investment 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 Virtus Investment Partners 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.