Correlation Between Exelon and Centrais Eltricas

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

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

Diversification Opportunities for Exelon and Centrais Eltricas

0.65

Correlation Coefficient

Exelon  Centrais Eltricas

Poor diversification

The 3 months correlation between Exelon and Centrais is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Exelon and Centrais Eltricas Brasileiras in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centrais Eltricas and Exelon 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 Exelon 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 Exelon i.e., Exelon and Centrais Eltricas go up and down completely randomly.

Pair Corralation between Exelon and Centrais Eltricas

Considering the 90-day investment horizon Exelon is expected to under-perform the Centrais Eltricas. But the stock apears to be less risky and, when comparing its historical volatility, Exelon is 2.16 times less risky than Centrais Eltricas. The stock trades about 0.0 of its potential returns per unit of risk. The Centrais Eltricas Brasileiras is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  762.00  in Centrais Eltricas Brasileiras on September 19, 2024 and sell it today you would lose (106.00) from holding Centrais Eltricas Brasileiras or give up 13.91% of portfolio value over 90 days.

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

Exelon  vs.  Centrais Eltricas Brasileiras

Exelon

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Exelon has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Exelon is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

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 abnormal performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Exelon and Centrais Eltricas

The main advantage of trading using opposite Exelon and Centrais Eltricas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exelon 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 Exelon 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.