Correlation Between Centrais Electricas and Via Renewables

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

Diversification Opportunities for Centrais Electricas and Via Renewables

-0.74

Correlation Coefficient

Centrais Electricas  Via Renewables

Pay attention - limited upside

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

Pair Corralation between Centrais Electricas and Via Renewables

Considering the 90-day investment horizon Centrais Electricas Brasileiras is expected to under-perform the Via Renewables. But the stock apears to be less risky and, when comparing its historical volatility, Centrais Electricas Brasileiras is 1.14 times less risky than Via Renewables. The stock trades about -0.02 of its potential returns per unit of risk. The Via Renewables is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,133  in Via Renewables on September 12, 2024 and sell it today you would earn a total of  1,077  from holding Via Renewables or generate 95.06% 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.  Via Renewables

Centrais Electricas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Centrais Electricas Brasileiras has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unfluctuating performance in the last few months, the Stock's fundamental drivers remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Via Renewables

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Via Renewables are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Via Renewables may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Centrais Electricas and Via Renewables

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

The idea behind Centrais Electricas Brasileiras and Via Renewables 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.