Correlation Between Companhia Siderrgica and Elektro Redes

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

By analyzing existing cross correlation between Companhia Siderrgica Nacional and Elektro Redes SA, you can compare the effects of market volatilities on Companhia Siderrgica and Elektro Redes 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 Siderrgica with a short position of Elektro Redes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Companhia Siderrgica and Elektro Redes.

Diversification Opportunities for Companhia Siderrgica and Elektro Redes

-0.44

Correlation Coefficient

Companhia Siderrgica  Elektro Redes

Very good diversification

The 3 months correlation between Companhia and Elektro is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Companhia Siderrgica Nacional and Elektro Redes SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elektro Redes SA and Companhia Siderrgica 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 Siderrgica Nacional are associated (or correlated) with Elektro Redes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elektro Redes SA has no effect on the direction of Companhia Siderrgica i.e., Companhia Siderrgica and Elektro Redes go up and down completely randomly.

Pair Corralation between Companhia Siderrgica and Elektro Redes

Assuming the 90 days trading horizon Companhia Siderrgica Nacional is expected to under-perform the Elektro Redes. But the stock apears to be less risky and, when comparing its historical volatility, Companhia Siderrgica Nacional is 1.09 times less risky than Elektro Redes. The stock trades about -0.19 of its potential returns per unit of risk. The Elektro Redes SA is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  4,152  in Elektro Redes SA on September 26, 2024 and sell it today you would earn a total of  948.00  from holding Elektro Redes SA or generate 22.83% return on investment over 90 days.

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

Companhia Siderrgica Nacional  vs.  Elektro Redes SA

Companhia Siderrgica

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Companhia Siderrgica Nacional has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Elektro Redes SA

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Elektro Redes SA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Elektro Redes unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Companhia Siderrgica and Elektro Redes

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

The idea behind Companhia Siderrgica Nacional and Elektro Redes SA 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.