Correlation Between CTEEP Companhia and Equatorial Energia

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

By analyzing existing cross correlation between CTEEP Companhia and Equatorial Energia SA, you can compare the effects of market volatilities on CTEEP Companhia and Equatorial Energia 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 CTEEP Companhia with a short position of Equatorial Energia. Check out your portfolio center. Please also check ongoing floating volatility patterns of CTEEP Companhia and Equatorial Energia.

Diversification Opportunities for CTEEP Companhia and Equatorial Energia

0.54

Correlation Coefficient

CTEEP Companhia  Equatorial Energia

Very weak diversification

The 3 months correlation between CTEEP and Equatorial is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding CTEEP Companhia and Equatorial Energia SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equatorial Energia and CTEEP Companhia 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 CTEEP Companhia are associated (or correlated) with Equatorial Energia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equatorial Energia has no effect on the direction of CTEEP Companhia i.e., CTEEP Companhia and Equatorial Energia go up and down completely randomly.

Pair Corralation between CTEEP Companhia and Equatorial Energia

Assuming the 90 days trading horizon CTEEP Companhia is expected to generate 0.83 times more return on investment than Equatorial Energia. However, CTEEP Companhia is 1.21 times less risky than Equatorial Energia. It trades about -0.05 of its potential returns per unit of risk. Equatorial Energia SA is currently generating about -0.14 per unit of risk. If you would invest  3,187  in CTEEP Companhia on September 14, 2024 and sell it today you would lose (142.00) from holding CTEEP Companhia or give up 4.46% of portfolio value over 90 days.

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

CTEEP Companhia  vs.  Equatorial Energia SA

CTEEP Companhia

Risk-Adjusted Performance

0 of 100

Very Weak

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

Equatorial Energia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Equatorial Energia SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with CTEEP Companhia and Equatorial Energia

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

The idea behind CTEEP Companhia and Equatorial Energia 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.

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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.