Correlation Between Companhia Energetica and SSE PLC

Can any of the company-specific risk be diversified away by investing in both Companhia Energetica and SSE PLC 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 Companhia Energetica and SSE PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Companhia Energetica de and SSE PLC ADR, you can compare the effects of market volatilities on Companhia Energetica and SSE PLC 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 Companhia Energetica with a short position of SSE PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Companhia Energetica and SSE PLC.

Diversification Opportunities for Companhia Energetica and SSE PLC

-0.2

Correlation Coefficient

Companhia Energetica  SSE PLC

Good diversification

The 3 months correlation between Companhia and SSE is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Companhia Energetica de and SSE PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SSE PLC ADR and Companhia Energetica 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 Companhia Energetica de are associated (or correlated) with SSE PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SSE PLC ADR has no effect on the direction of Companhia Energetica i.e., Companhia Energetica and SSE PLC go up and down completely randomly.

Pair Corralation between Companhia Energetica and SSE PLC

Considering the 90-day investment horizon Companhia Energetica de is expected to generate 1.37 times more return on investment than SSE PLC. However, Companhia Energetica is 1.37 times more volatile than SSE PLC ADR. It trades about 0.06 of its potential returns per unit of risk. SSE PLC ADR is currently generating about 0.02 per unit of risk. If you would invest  186.00  in Companhia Energetica de on December 20, 2024 and sell it today you would earn a total of  12.00  from holding Companhia Energetica de or generate 6.45% return on investment over 90 days.

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

Companhia Energetica de  vs.  SSE PLC ADR

Companhia Energetica

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Companhia Energetica de are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady forward indicators, Companhia Energetica may actually be approaching a critical reversion point that can send shares even higher in April 2025.

SSE PLC ADR

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SSE PLC ADR are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, SSE PLC is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Companhia Energetica and SSE PLC

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

The idea behind Companhia Energetica de and SSE PLC ADR 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.