Correlation Between Centrais Eltricas and Exelon

Can any of the company-specific risk be diversified away by investing in both Centrais Eltricas and Exelon 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 Eltricas and Exelon 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 Exelon, you can compare the effects of market volatilities on Centrais Eltricas and Exelon 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 Eltricas with a short position of Exelon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Centrais Eltricas and Exelon.

Diversification Opportunities for Centrais Eltricas and Exelon

0.65

Correlation Coefficient

Centrais Eltricas  Exelon

Poor diversification

The 3 months correlation between Centrais and Exelon is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Centrais Eltricas Brasileiras and Exelon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exelon and Centrais Eltricas 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 Exelon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exelon has no effect on the direction of Centrais Eltricas i.e., Centrais Eltricas and Exelon go up and down completely randomly.

Pair Corralation between Centrais Eltricas and Exelon

Assuming the 90 days horizon Centrais Eltricas is expected to generate 6.33 times less return on investment than Exelon. In addition to that, Centrais Eltricas is 2.04 times more volatile than Exelon. It trades about 0.0 of its total potential returns per unit of risk. Exelon is currently generating about 0.0 per unit of volatility. If you would invest  3,708  in Exelon on September 19, 2024 and sell it today you would lose (56.00) from holding Exelon or give up 1.51% of portfolio value over 90 days.

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

Centrais Eltricas Brasileiras  vs.  Exelon

Centrais Eltricas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Centrais Eltricas Brasileiras has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Exelon

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Exelon has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Exelon is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Centrais Eltricas and Exelon

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

The idea behind Centrais Eltricas Brasileiras and Exelon 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.