Correlation Between Rumo SA and Equatorial Energia

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

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

Diversification Opportunities for Rumo SA and Equatorial Energia

0.21

Correlation Coefficient

Rumo SA  Equatorial Energia

Modest diversification

The 3 months correlation between Rumo and Equatorial is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Rumo SA and Equatorial Energia SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equatorial Energia and Rumo SA 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 Rumo SA are associated (or correlated) with Equatorial Energia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equatorial Energia has no effect on the direction of Rumo SA i.e., Rumo SA and Equatorial Energia go up and down completely randomly.

Pair Corralation between Rumo SA and Equatorial Energia

Assuming the 90 days trading horizon Rumo SA is expected to under-perform the Equatorial Energia. In addition to that, Rumo SA is 1.88 times more volatile than Equatorial Energia SA. It trades about -0.06 of its total potential returns per unit of risk. Equatorial Energia SA is currently generating about 0.0 per unit of volatility. If you would invest  3,472  in Equatorial Energia SA on April 25, 2025 and sell it today you would lose (12.00) from holding Equatorial Energia SA or give up 0.35% of portfolio value over 90 days.

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

Rumo SA  vs.  Equatorial Energia SA

Rumo SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Rumo SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak 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.

Equatorial Energia

Risk-Adjusted Performance

Weak

Over the last 90 days Equatorial Energia SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Equatorial Energia is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Rumo SA and Equatorial Energia

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

The idea behind Rumo SA and Equatorial Energia 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.