Correlation Between Companhiade Eletricidade and Rede Energia

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

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

Diversification Opportunities for Companhiade Eletricidade and Rede Energia

0.33

Correlation Coefficient

Companhiade Eletricidade  Rede Energia

Weak diversification

The 3 months correlation between Companhiade and Rede is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Companhiade Eletricidade do and Rede Energia Participaes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rede Energia Participaes and Companhiade Eletricidade 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 Companhiade Eletricidade do are associated (or correlated) with Rede Energia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rede Energia Participaes has no effect on the direction of Companhiade Eletricidade i.e., Companhiade Eletricidade and Rede Energia go up and down completely randomly.

Pair Corralation between Companhiade Eletricidade and Rede Energia

Assuming the 90 days trading horizon Companhiade Eletricidade do is expected to generate 0.87 times more return on investment than Rede Energia. However, Companhiade Eletricidade do is 1.15 times less risky than Rede Energia. It trades about 0.02 of its potential returns per unit of risk. Rede Energia Participaes is currently generating about 0.0 per unit of risk. If you would invest  3,721  in Companhiade Eletricidade do on October 8, 2024 and sell it today you would earn a total of  179.00  from holding Companhiade Eletricidade do or generate 4.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	91.13%
Values	Daily Returns

Companhiade Eletricidade do  vs.  Rede Energia Participaes

Companhiade Eletricidade

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Companhiade Eletricidade do are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Companhiade Eletricidade is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Rede Energia Participaes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rede Energia Participaes 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 Companhiade Eletricidade and Rede Energia

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

The idea behind Companhiade Eletricidade do and Rede Energia Participaes 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.