Correlation Between CenterPoint Energy and Transportadora

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

By analyzing existing cross correlation between CenterPoint Energy and Transportadora de Gas, you can compare the effects of market volatilities on CenterPoint Energy and Transportadora 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 CenterPoint Energy with a short position of Transportadora. Check out your portfolio center. Please also check ongoing floating volatility patterns of CenterPoint Energy and Transportadora.

Diversification Opportunities for CenterPoint Energy and Transportadora

-0.68

Correlation Coefficient

CenterPoint Energy  Transportadora

Excellent diversification

The 3 months correlation between CenterPoint and Transportadora is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding CenterPoint Energy and Transportadora de Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transportadora de Gas and CenterPoint Energy 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 CenterPoint Energy are associated (or correlated) with Transportadora. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transportadora de Gas has no effect on the direction of CenterPoint Energy i.e., CenterPoint Energy and Transportadora go up and down completely randomly.

Pair Corralation between CenterPoint Energy and Transportadora

Considering the 90-day investment horizon CenterPoint Energy is expected to generate 0.3 times more return on investment than Transportadora. However, CenterPoint Energy is 3.3 times less risky than Transportadora. It trades about 0.16 of its potential returns per unit of risk. Transportadora de Gas is currently generating about -0.01 per unit of risk. If you would invest  3,216  in CenterPoint Energy on December 25, 2024 and sell it today you would earn a total of  356.00  from holding CenterPoint Energy or generate 11.07% return on investment over 90 days.

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

CenterPoint Energy  vs.  Transportadora de Gas

CenterPoint Energy

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CenterPoint Energy are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, CenterPoint Energy may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Transportadora de Gas

Risk-Adjusted Performance

Very Weak

Over the last 90 days Transportadora de Gas has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Transportadora is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with CenterPoint Energy and Transportadora

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

The idea behind CenterPoint Energy and Transportadora de Gas 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.