Correlation Between Empresa Distribuidora and WEC Energy

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

By analyzing existing cross correlation between Empresa Distribuidora y and WEC Energy Group, you can compare the effects of market volatilities on Empresa Distribuidora and WEC 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 Empresa Distribuidora with a short position of WEC Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Empresa Distribuidora and WEC Energy.

Diversification Opportunities for Empresa Distribuidora and WEC Energy

-0.46

Correlation Coefficient

Empresa Distribuidora  WEC Energy

Very good diversification

The 3 months correlation between Empresa and WEC is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Empresa Distribuidora y and WEC Energy Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WEC Energy Group and Empresa Distribuidora 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 Empresa Distribuidora y are associated (or correlated) with WEC Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WEC Energy Group has no effect on the direction of Empresa Distribuidora i.e., Empresa Distribuidora and WEC Energy go up and down completely randomly.

Pair Corralation between Empresa Distribuidora and WEC Energy

Considering the 90-day investment horizon Empresa Distribuidora y is expected to under-perform the WEC Energy. In addition to that, Empresa Distribuidora is 3.2 times more volatile than WEC Energy Group. It trades about -0.1 of its total potential returns per unit of risk. WEC Energy Group is currently generating about 0.15 per unit of volatility. If you would invest  9,261  in WEC Energy Group on January 9, 2025 and sell it today you would earn a total of  1,175  from holding WEC Energy Group or generate 12.69% return on investment over 90 days.

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

Empresa Distribuidora y  vs.  WEC Energy Group

Empresa Distribuidora

Risk-Adjusted Performance

Very Weak

Over the last 90 days Empresa Distribuidora y has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in May 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

WEC Energy Group

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WEC Energy Group are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, WEC Energy exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Empresa Distribuidora and WEC Energy

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

The idea behind Empresa Distribuidora y and WEC Energy Group 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..