Correlation Between Centrais Elétricas and PGE Corp

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

Diversification Opportunities for Centrais Elétricas and PGE Corp

-0.51

Correlation Coefficient

Centrais Elétricas  PGE Corp

Excellent diversification

The 3 months correlation between Centrais and PGE is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Centrais Eltricas Brasileiras and PGE Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PGE Corp 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 PGE Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PGE Corp has no effect on the direction of Centrais Elétricas i.e., Centrais Elétricas and PGE Corp go up and down completely randomly.

Pair Corralation between Centrais Elétricas and PGE Corp

Assuming the 90 days horizon Centrais Eltricas Brasileiras is expected to generate 0.79 times more return on investment than PGE Corp. However, Centrais Eltricas Brasileiras is 1.27 times less risky than PGE Corp. It trades about 0.24 of its potential returns per unit of risk. PGE Corp is currently generating about -0.11 per unit of risk. If you would invest  609.00  in Centrais Eltricas Brasileiras on December 28, 2024 and sell it today you would earn a total of  174.00  from holding Centrais Eltricas Brasileiras or generate 28.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Centrais Eltricas Brasileiras  vs.  PGE Corp

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 18 (%) 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.

PGE Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days PGE Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Centrais Elétricas and PGE Corp

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

The idea behind Centrais Eltricas Brasileiras and PGE Corp 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.

Check out your portfolio center.

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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.