Correlation Between Engie Brasil and Centrais Eltricas

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

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

Diversification Opportunities for Engie Brasil and Centrais Eltricas

0.94

Correlation Coefficient

Engie Brasil  Centrais Eltricas

Almost no diversification

The 3 months correlation between Engie and Centrais is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Engie Brasil Energia and Centrais Eltricas Brasileiras in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centrais Eltricas and Engie Brasil 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 Engie Brasil Energia are associated (or correlated) with Centrais Eltricas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Centrais Eltricas has no effect on the direction of Engie Brasil i.e., Engie Brasil and Centrais Eltricas go up and down completely randomly.

Pair Corralation between Engie Brasil and Centrais Eltricas

Assuming the 90 days horizon Engie Brasil Energia is expected to under-perform the Centrais Eltricas. But the pink sheet apears to be less risky and, when comparing its historical volatility, Engie Brasil Energia is 1.21 times less risky than Centrais Eltricas. The pink sheet trades about -0.05 of its potential returns per unit of risk. The Centrais Eltricas Brasileiras is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  838.00  in Centrais Eltricas Brasileiras on October 11, 2024 and sell it today you would lose (203.00) from holding Centrais Eltricas Brasileiras or give up 24.22% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Engie Brasil Energia  vs.  Centrais Eltricas Brasileiras

Engie Brasil Energia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Engie Brasil Energia has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Centrais Eltricas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Centrais Eltricas Brasileiras has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Engie Brasil and Centrais Eltricas

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

The idea behind Engie Brasil Energia 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.