Correlation Between Centrais Electricas and Altus Power

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

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

Diversification Opportunities for Centrais Electricas and Altus Power

0.74

Correlation Coefficient

Centrais Electricas  Altus Power

Poor diversification

The 3 months correlation between Centrais and Altus is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Centrais Electricas Brasileira and Altus Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Altus Power and Centrais Electricas 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 Electricas Brasileiras are associated (or correlated) with Altus Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Altus Power has no effect on the direction of Centrais Electricas i.e., Centrais Electricas and Altus Power go up and down completely randomly.

Pair Corralation between Centrais Electricas and Altus Power

Considering the 90-day investment horizon Centrais Electricas Brasileiras is expected to generate 0.38 times more return on investment than Altus Power. However, Centrais Electricas Brasileiras is 2.63 times less risky than Altus Power. It trades about 0.25 of its potential returns per unit of risk. Altus Power is currently generating about 0.09 per unit of risk. 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 Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Centrais Electricas Brasileira  vs.  Altus Power

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.

Altus Power

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Altus Power are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Altus Power unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Centrais Electricas and Altus Power

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

The idea behind Centrais Electricas Brasileiras and Altus Power 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 Transaction History module to view history of all your transactions and understand their impact on performance.