Correlation Between BB Seguridade and Centrais Electricas

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

By analyzing existing cross correlation between BB Seguridade Participacoes and Centrais Electricas Brasileiras, you can compare the effects of market volatilities on BB Seguridade and Centrais Electricas 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 BB Seguridade with a short position of Centrais Electricas. Check out your portfolio center. Please also check ongoing floating volatility patterns of BB Seguridade and Centrais Electricas.

Diversification Opportunities for BB Seguridade and Centrais Electricas

0.96

Correlation Coefficient

BB Seguridade  Centrais Electricas

Almost no diversification

The 3 months correlation between BBSEY and Centrais is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding BB Seguridade Participacoes and Centrais Electricas Brasileira in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centrais Electricas and BB Seguridade 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 BB Seguridade Participacoes are associated (or correlated) with Centrais Electricas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Centrais Electricas has no effect on the direction of BB Seguridade i.e., BB Seguridade and Centrais Electricas go up and down completely randomly.

Pair Corralation between BB Seguridade and Centrais Electricas

Assuming the 90 days horizon BB Seguridade Participacoes is expected to generate 1.02 times more return on investment than Centrais Electricas. However, BB Seguridade is 1.02 times more volatile than Centrais Electricas Brasileiras. It trades about 0.26 of its potential returns per unit of risk. Centrais Electricas Brasileiras is currently generating about 0.25 per unit of risk. If you would invest  544.00  in BB Seguridade Participacoes on December 29, 2024 and sell it today you would earn a total of  158.00  from holding BB Seguridade Participacoes or generate 29.04% return on investment over 90 days.

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

BB Seguridade Participacoes  vs.  Centrais Electricas Brasileira

BB Seguridade Partic

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BB Seguridade Participacoes are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile technical and fundamental indicators, BB Seguridade showed solid returns over the last few months and may actually be approaching a breakup point.

Centrais Electricas

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Centrais Electricas Brasileiras are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady fundamental drivers, Centrais Electricas reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BB Seguridade and Centrais Electricas

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

The idea behind BB Seguridade Participacoes and Centrais Electricas Brasileiras 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .