Correlation Between Centrais Electricas and Engie Brasil

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

Diversification Opportunities for Centrais Electricas and Engie Brasil

0.72

Correlation Coefficient

Centrais Electricas  Engie Brasil

Poor diversification

The 3 months correlation between Centrais and Engie is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Centrais Electricas Brasileira 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 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 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 Electricas i.e., Centrais Electricas and Engie Brasil go up and down completely randomly.

Pair Corralation between Centrais Electricas and Engie Brasil

Considering the 90-day investment horizon Centrais Electricas Brasileiras is expected to generate 0.87 times more return on investment than Engie Brasil. However, Centrais Electricas Brasileiras is 1.16 times less risky than Engie Brasil. It trades about 0.07 of its potential returns per unit of risk. Engie Brasil Energia is currently generating about 0.03 per unit of risk. If you would invest  605.00  in Centrais Electricas Brasileiras on November 19, 2024 and sell it today you would earn a total of  53.00  from holding Centrais Electricas Brasileiras or generate 8.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

Centrais Electricas Brasileira  vs.  Engie Brasil Energia

Centrais Electricas

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Centrais Electricas Brasileiras are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady fundamental drivers, Centrais Electricas may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Engie Brasil Energia

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Engie Brasil Energia are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical and fundamental indicators, Engie Brasil is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Centrais Electricas and Engie Brasil

The main advantage of trading using opposite Centrais Electricas and Engie Brasil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Centrais Electricas 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 Electricas 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.

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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.