Correlation Between Engie Brasil and Korea Electric

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

Diversification Opportunities for Engie Brasil and Korea Electric

0.58

Correlation Coefficient

Engie Brasil  Korea Electric

Very weak diversification

The 3 months correlation between Engie and Korea is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Engie Brasil Energia and Korea Electric Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea Electric Power 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 Korea Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korea Electric Power has no effect on the direction of Engie Brasil i.e., Engie Brasil and Korea Electric go up and down completely randomly.

Pair Corralation between Engie Brasil and Korea Electric

Assuming the 90 days horizon Engie Brasil Energia is expected to generate 1.03 times more return on investment than Korea Electric. However, Engie Brasil is 1.03 times more volatile than Korea Electric Power. It trades about 0.06 of its potential returns per unit of risk. Korea Electric Power is currently generating about -0.06 per unit of risk. If you would invest  623.00  in Engie Brasil Energia on November 28, 2024 and sell it today you would earn a total of  37.00  from holding Engie Brasil Energia or generate 5.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.31%
Values	Daily Returns

Engie Brasil Energia  vs.  Korea Electric Power

Engie Brasil Energia

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Engie Brasil Energia are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Engie Brasil may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Korea Electric Power

Risk-Adjusted Performance

Very Weak

Over the last 90 days Korea Electric Power has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's technical and fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Engie Brasil and Korea Electric

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

The idea behind Engie Brasil Energia and Korea Electric Power 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.