Correlation Between Genie Energy and Centrais Electricas

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

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

Diversification Opportunities for Genie Energy and Centrais Electricas

-0.54

Correlation Coefficient

Genie Energy  Centrais Electricas

Excellent diversification

The 3 months correlation between Genie and Centrais is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Genie 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 Genie Energy 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 Genie 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 Genie Energy i.e., Genie Energy and Centrais Electricas go up and down completely randomly.

Pair Corralation between Genie Energy and Centrais Electricas

Considering the 90-day investment horizon Genie Energy is expected to under-perform the Centrais Electricas. But the stock apears to be less risky and, when comparing its historical volatility, Genie Energy is 1.2 times less risky than Centrais Electricas. The stock trades about -0.01 of its potential returns per unit of risk. The Centrais Electricas Brasileiras is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  557.00  in Centrais Electricas Brasileiras on November 28, 2024 and sell it today you would earn a total of  89.00  from holding Centrais Electricas Brasileiras or generate 15.98% return on investment over 90 days.

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

Genie Energy  vs.  Centrais Electricas Brasileira

Genie Energy

Risk-Adjusted Performance

Very Weak

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

Centrais Electricas

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Centrais Electricas Brasileiras are ranked lower than 10 (%) 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 Genie Energy and Centrais Electricas

The main advantage of trading using opposite Genie Energy and Centrais Electricas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Genie Energy 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 Genie 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.