Correlation Between PNM Old and Centrais Electricas

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

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

Diversification Opportunities for PNM Old and Centrais Electricas

0.0

Correlation Coefficient

PNM Old  Centrais Electricas

Pay attention - limited upside

The 3 months correlation between PNM and Centrais is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding PNM Old and Centrais Electricas Brasileira in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centrais Electricas and PNM Old 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 PNM Old 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 PNM Old i.e., PNM Old and Centrais Electricas go up and down completely randomly.

Pair Corralation between PNM Old and Centrais Electricas

If you would invest  557.00  in Centrais Electricas Brasileiras on December 1, 2024 and sell it today you would earn a total of  95.00  from holding Centrais Electricas Brasileiras or generate 17.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

PNM Old  vs.  Centrais Electricas Brasileira

PNM Old

Risk-Adjusted Performance

Very Weak

Over the last 90 days PNM Old has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, PNM Old is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Centrais Electricas

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Centrais Electricas Brasileiras are ranked lower than 11 (%) 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 PNM Old and Centrais Electricas

The main advantage of trading using opposite PNM Old and Centrais Electricas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PNM Old 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 PNM Old 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.

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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.