Correlation Between CTEEP Companhia and Engie Brasil

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

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

Diversification Opportunities for CTEEP Companhia and Engie Brasil

-0.11

Correlation Coefficient

CTEEP Companhia  Engie Brasil

Good diversification

The 3 months correlation between CTEEP and Engie is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding CTEEP Companhia and Engie Brasil Energia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Engie Brasil 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 Engie Brasil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Engie Brasil Energia has no effect on the direction of CTEEP Companhia i.e., CTEEP Companhia and Engie Brasil go up and down completely randomly.

Pair Corralation between CTEEP Companhia and Engie Brasil

Assuming the 90 days trading horizon CTEEP Companhia is expected to under-perform the Engie Brasil. In addition to that, CTEEP Companhia is 1.48 times more volatile than Engie Brasil Energia. It trades about -0.02 of its total potential returns per unit of risk. Engie Brasil Energia is currently generating about 0.18 per unit of volatility. If you would invest  3,536  in Engie Brasil Energia on December 31, 2024 and sell it today you would earn a total of  371.00  from holding Engie Brasil Energia or generate 10.49% return on investment over 90 days.

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

CTEEP Companhia  vs.  Engie Brasil Energia

CTEEP Companhia

Risk-Adjusted Performance

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 current stock price uproar, may contribute to short-horizon losses for the private investors.

Engie Brasil Energia

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Engie Brasil Energia are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Engie Brasil may actually be approaching a critical reversion point that can send shares even higher in May 2025.

Pair Trading with CTEEP Companhia and Engie Brasil

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

The idea behind CTEEP Companhia and Engie Brasil Energia 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.