Correlation Between Capri Holdings and Centrais Electricas

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

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

Diversification Opportunities for Capri Holdings and Centrais Electricas

-0.32

Correlation Coefficient

Capri Holdings  Centrais Electricas

Very good diversification

The 3 months correlation between Capri and Centrais is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Capri Holdings and Centrais Electricas Brasileira in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centrais Electricas and Capri Holdings 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 Capri Holdings 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 Capri Holdings i.e., Capri Holdings and Centrais Electricas go up and down completely randomly.

Pair Corralation between Capri Holdings and Centrais Electricas

Given the investment horizon of 90 days Capri Holdings is expected to generate 6.41 times less return on investment than Centrais Electricas. In addition to that, Capri Holdings is 2.08 times more volatile than Centrais Electricas Brasileiras. It trades about 0.02 of its total potential returns per unit of risk. Centrais Electricas Brasileiras is currently generating about 0.25 per unit of volatility. If you would invest  560.00  in Centrais Electricas Brasileiras on December 29, 2024 and sell it today you would earn a total of  154.00  from holding Centrais Electricas Brasileiras or generate 27.5% return on investment over 90 days.

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

Capri Holdings  vs.  Centrais Electricas Brasileira

Capri Holdings

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Capri Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Capri Holdings is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

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 Capri Holdings and Centrais Electricas

The main advantage of trading using opposite Capri Holdings and Centrais Electricas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capri Holdings 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 Capri Holdings 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.