Correlation Between Centrais Electricas and Centrais Elétricas

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

Diversification Opportunities for Centrais Electricas and Centrais Elétricas

0.99

Correlation Coefficient

Centrais Electricas  Centrais Elétricas

No risk reduction

The 3 months correlation between Centrais and Centrais is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Centrais Electricas Brasileira and Centrais Eltricas Brasileiras in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centrais Elétricas 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 Centrais Elétricas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Centrais Elétricas has no effect on the direction of Centrais Electricas i.e., Centrais Electricas and Centrais Elétricas go up and down completely randomly.

Pair Corralation between Centrais Electricas and Centrais Elétricas

Considering the 90-day investment horizon Centrais Electricas Brasileiras is expected to generate 0.9 times more return on investment than Centrais Elétricas. However, Centrais Electricas Brasileiras is 1.12 times less risky than Centrais Elétricas. It trades about 0.25 of its potential returns per unit of risk. Centrais Eltricas Brasileiras is currently generating about 0.2 per unit of risk. If you would invest  560.00  in Centrais Electricas Brasileiras on December 30, 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	Very Strong
Accuracy	100.0%
Values	Daily Returns

Centrais Electricas Brasileira  vs.  Centrais Eltricas Brasileiras

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.

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.

Pair Trading with Centrais Electricas and Centrais Elétricas

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

The idea behind Centrais Electricas Brasileiras and Centrais Eltricas Brasileiras 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.