Correlation Between Centrais Eltricas and Elektro Redes

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

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

Diversification Opportunities for Centrais Eltricas and Elektro Redes

0.02

Correlation Coefficient

Centrais Eltricas  Elektro Redes

Significant diversification

The 3 months correlation between Centrais and Elektro is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Centrais Eltricas Brasileiras and Elektro Redes SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elektro Redes SA and Centrais Eltricas 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 Eltricas Brasileiras are associated (or correlated) with Elektro Redes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elektro Redes SA has no effect on the direction of Centrais Eltricas i.e., Centrais Eltricas and Elektro Redes go up and down completely randomly.

Pair Corralation between Centrais Eltricas and Elektro Redes

Assuming the 90 days trading horizon Centrais Eltricas Brasileiras is expected to generate 0.59 times more return on investment than Elektro Redes. However, Centrais Eltricas Brasileiras is 1.7 times less risky than Elektro Redes. It trades about 0.24 of its potential returns per unit of risk. Elektro Redes SA is currently generating about 0.02 per unit of risk. If you would invest  3,410  in Centrais Eltricas Brasileiras on December 24, 2024 and sell it today you would earn a total of  758.00  from holding Centrais Eltricas Brasileiras or generate 22.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

Centrais Eltricas Brasileiras  vs.  Elektro Redes SA

Centrais Eltricas

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Centrais Eltricas Brasileiras are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Centrais Eltricas unveiled solid returns over the last few months and may actually be approaching a breakup point.

Elektro Redes SA

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Elektro Redes SA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Elektro Redes is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Centrais Eltricas and Elektro Redes

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

The idea behind Centrais Eltricas Brasileiras and Elektro Redes SA 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.