Correlation Between Energisa and Diagnsticos

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

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

Diversification Opportunities for Energisa and Diagnsticos

0.56

Correlation Coefficient

Energisa  Diagnsticos

Very weak diversification

The 3 months correlation between Energisa and Diagnsticos is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Energisa SA and Diagnsticos da Amrica in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diagnsticos da Amrica and Energisa 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 Energisa SA are associated (or correlated) with Diagnsticos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diagnsticos da Amrica has no effect on the direction of Energisa i.e., Energisa and Diagnsticos go up and down completely randomly.

Pair Corralation between Energisa and Diagnsticos

Assuming the 90 days trading horizon Energisa SA is expected to generate 0.19 times more return on investment than Diagnsticos. However, Energisa SA is 5.24 times less risky than Diagnsticos. It trades about 0.0 of its potential returns per unit of risk. Diagnsticos da Amrica is currently generating about -0.11 per unit of risk. If you would invest  4,571  in Energisa SA on March 31, 2024 and sell it today you would lose (9.00) from holding Energisa SA or give up 0.2% of portfolio value over 90 days.

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

Energisa SA  vs.  Diagnsticos da Amrica

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 somewhat strong basic indicators, Energisa is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Diagnsticos da Amrica

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Diagnsticos da Amrica has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in July 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Energisa and Diagnsticos

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

The idea behind Energisa SA and Diagnsticos da Amrica 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.