Correlation Between Enlight Renewable and Centrais Electricas

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

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

Diversification Opportunities for Enlight Renewable and Centrais Electricas

-0.18

Correlation Coefficient

Enlight Renewable  Centrais Electricas

Good diversification

The 3 months correlation between Enlight and Centrais is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Enlight Renewable Energy and Centrais Electricas Brasileira in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centrais Electricas and Enlight Renewable 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 Enlight Renewable Energy are associated (or correlated) with Centrais Electricas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Centrais Electricas has no effect on the direction of Enlight Renewable i.e., Enlight Renewable and Centrais Electricas go up and down completely randomly.

Pair Corralation between Enlight Renewable and Centrais Electricas

Given the investment horizon of 90 days Enlight Renewable is expected to generate 32.16 times less return on investment than Centrais Electricas. In addition to that, Enlight Renewable is 1.45 times more volatile than Centrais Electricas Brasileiras. It trades about 0.01 of its total potential returns per unit of risk. Centrais Electricas Brasileiras is currently generating about 0.31 per unit of volatility. If you would invest  553.00  in Centrais Electricas Brasileiras on December 21, 2024 and sell it today you would earn a total of  188.00  from holding Centrais Electricas Brasileiras or generate 34.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Enlight Renewable Energy  vs.  Centrais Electricas Brasileira

Enlight Renewable Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Enlight Renewable Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, Enlight Renewable is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

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 24 (%) 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.

Pair Trading with Enlight Renewable and Centrais Electricas

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

The idea behind Enlight Renewable Energy and Centrais Electricas 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.