Correlation Between Equatorial Energia and Duke Energy

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

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

Diversification Opportunities for Equatorial Energia and Duke Energy

0.65

Correlation Coefficient

Equatorial Energia  Duke Energy

Poor diversification

The 3 months correlation between Equatorial and Duke is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Equatorial Energia SA and Duke Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Duke Energy and Equatorial 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 Equatorial Energia SA are associated (or correlated) with Duke Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Duke Energy has no effect on the direction of Equatorial Energia i.e., Equatorial Energia and Duke Energy go up and down completely randomly.

Pair Corralation between Equatorial Energia and Duke Energy

Assuming the 90 days horizon Equatorial Energia SA is expected to generate 2.41 times more return on investment than Duke Energy. However, Equatorial Energia is 2.41 times more volatile than Duke Energy. It trades about 0.05 of its potential returns per unit of risk. Duke Energy is currently generating about 0.04 per unit of risk. If you would invest  470.00  in Equatorial Energia SA on June 11, 2024 and sell it today you would earn a total of  194.00  from holding Equatorial Energia SA or generate 41.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	74.75%
Values	Daily Returns

Equatorial Energia SA  vs.  Duke Energy

Equatorial Energia

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Equatorial Energia SA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady technical and fundamental indicators, Equatorial Energia showed solid returns over the last few months and may actually be approaching a breakup point.

Duke Energy

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Duke Energy are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady basic indicators, Duke Energy disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Equatorial Energia and Duke Energy

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

The idea behind Equatorial Energia SA and Duke Energy 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.