Correlation Between Centrais Electricas and Maxim Power

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

Diversification Opportunities for Centrais Electricas and Maxim Power

-0.64

Correlation Coefficient

Centrais Electricas  Maxim Power

Excellent diversification

The 3 months correlation between Centrais and Maxim is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Centrais Electricas Brasileira and Maxim Power Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maxim Power Corp 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 Maxim Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maxim Power Corp has no effect on the direction of Centrais Electricas i.e., Centrais Electricas and Maxim Power go up and down completely randomly.

Pair Corralation between Centrais Electricas and Maxim Power

Considering the 90-day investment horizon Centrais Electricas Brasileiras is expected to generate 0.45 times more return on investment than Maxim Power. However, Centrais Electricas Brasileiras is 2.24 times less risky than Maxim Power. It trades about 0.25 of its potential returns per unit of risk. Maxim Power Corp is currently generating about -0.05 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 Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Centrais Electricas Brasileira  vs.  Maxim Power Corp

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.

Maxim Power Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Maxim Power Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Centrais Electricas and Maxim Power

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

The idea behind Centrais Electricas Brasileiras and Maxim Power 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.

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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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.