Correlation Between Fundo Investec and Energisa

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

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

Diversification Opportunities for Fundo Investec and Energisa

0.8

Correlation Coefficient

Fundo Investec  Energisa

Very poor diversification

The 3 months correlation between Fundo and Energisa is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Fundo Investec IMB and Energisa SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energisa SA and Fundo Investec 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 Fundo Investec IMB are associated (or correlated) with Energisa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energisa SA has no effect on the direction of Fundo Investec i.e., Fundo Investec and Energisa go up and down completely randomly.

Pair Corralation between Fundo Investec and Energisa

Assuming the 90 days trading horizon Fundo Investec IMB is expected to generate 2.29 times more return on investment than Energisa. However, Fundo Investec is 2.29 times more volatile than Energisa SA. It trades about -0.04 of its potential returns per unit of risk. Energisa SA is currently generating about -0.2 per unit of risk. If you would invest  5,753  in Fundo Investec IMB on September 20, 2024 and sell it today you would lose (728.00) from holding Fundo Investec IMB or give up 12.65% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Fundo Investec IMB  vs.  Energisa SA

Fundo Investec IMB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fundo Investec IMB has generated negative risk-adjusted returns adding no value to fund investors. Despite latest weak performance, the Fund's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Energisa SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Energisa SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's technical and fundamental indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Fundo Investec and Energisa

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

The idea behind Fundo Investec IMB and Energisa 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.