Correlation Between EDP Renovveis and Dermapharm Holding

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

By analyzing existing cross correlation between EDP Renovveis SA and Dermapharm Holding SE, you can compare the effects of market volatilities on EDP Renovveis and Dermapharm Holding 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 EDP Renovveis with a short position of Dermapharm Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of EDP Renovveis and Dermapharm Holding.

Diversification Opportunities for EDP Renovveis and Dermapharm Holding

-0.59

Correlation Coefficient

EDP Renovveis  Dermapharm Holding

Excellent diversification

The 3 months correlation between EDP and Dermapharm is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding EDP Renovveis SA and Dermapharm Holding SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dermapharm Holding and EDP Renovveis 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 EDP Renovveis SA are associated (or correlated) with Dermapharm Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dermapharm Holding has no effect on the direction of EDP Renovveis i.e., EDP Renovveis and Dermapharm Holding go up and down completely randomly.

Pair Corralation between EDP Renovveis and Dermapharm Holding

Assuming the 90 days horizon EDP Renovveis SA is expected to generate 1.11 times more return on investment than Dermapharm Holding. However, EDP Renovveis is 1.11 times more volatile than Dermapharm Holding SE. It trades about 0.2 of its potential returns per unit of risk. Dermapharm Holding SE is currently generating about -0.06 per unit of risk. If you would invest  792.00  in EDP Renovveis SA on April 23, 2025 and sell it today you would earn a total of  207.00  from holding EDP Renovveis SA or generate 26.14% return on investment over 90 days.

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

EDP Renovveis SA  vs.  Dermapharm Holding SE

EDP Renovveis SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in EDP Renovveis SA are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, EDP Renovveis reported solid returns over the last few months and may actually be approaching a breakup point.

Dermapharm Holding

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dermapharm Holding SE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with EDP Renovveis and Dermapharm Holding

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

The idea behind EDP Renovveis SA and Dermapharm Holding SE 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.