Correlation Between Centrais Elétricas and Engie Brasil

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

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

Diversification Opportunities for Centrais Elétricas and Engie Brasil

0.71

Correlation Coefficient

Centrais Elétricas  Engie Brasil

Poor diversification

The 3 months correlation between Centrais and Engie is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Centrais Eltricas Brasileiras and Engie Brasil Energia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Engie Brasil Energia and Centrais Elétricas 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 Centrais Eltricas Brasileiras are associated (or correlated) with Engie Brasil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Engie Brasil Energia has no effect on the direction of Centrais Elétricas i.e., Centrais Elétricas and Engie Brasil go up and down completely randomly.

Pair Corralation between Centrais Elétricas and Engie Brasil

Assuming the 90 days horizon Centrais Eltricas Brasileiras is expected to generate 0.83 times more return on investment than Engie Brasil. However, Centrais Eltricas Brasileiras is 1.2 times less risky than Engie Brasil. It trades about 0.2 of its potential returns per unit of risk. Engie Brasil Energia is currently generating about 0.13 per unit of risk. If you would invest  609.00  in Centrais Eltricas Brasileiras on December 30, 2024 and sell it today you would earn a total of  152.00  from holding Centrais Eltricas Brasileiras or generate 24.96% return on investment over 90 days.

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

Centrais Eltricas Brasileiras  vs.  Engie Brasil Energia

Centrais Elétricas

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Centrais Eltricas Brasileiras are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Centrais Elétricas sustained solid returns over the last few months and may actually be approaching a breakup point.

Engie Brasil Energia

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Engie Brasil Energia are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Engie Brasil showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Centrais Elétricas and Engie Brasil

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

The idea behind Centrais Eltricas Brasileiras and Engie Brasil Energia 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.