Correlation Between Vast Renewables and Centrais Elétricas

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

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

Diversification Opportunities for Vast Renewables and Centrais Elétricas

-0.94

Correlation Coefficient

Vast Renewables  Centrais Elétricas

Pay attention - limited upside

The 3 months correlation between Vast and Centrais is -0.94. Overlapping area represents the amount of risk that can be diversified away by holding Vast Renewables Limited and Centrais Eltricas Brasileiras in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centrais Elétricas and Vast Renewables 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 Vast Renewables Limited are associated (or correlated) with Centrais Elétricas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Centrais Elétricas has no effect on the direction of Vast Renewables i.e., Vast Renewables and Centrais Elétricas go up and down completely randomly.

Pair Corralation between Vast Renewables and Centrais Elétricas

Given the investment horizon of 90 days Vast Renewables Limited is expected to under-perform the Centrais Elétricas. In addition to that, Vast Renewables is 3.73 times more volatile than Centrais Eltricas Brasileiras. It trades about -0.27 of its total potential returns per unit of risk. Centrais Eltricas Brasileiras is currently generating about 0.21 per unit of volatility. If you would invest  609.00  in Centrais Eltricas Brasileiras on December 29, 2024 and sell it today you would earn a total of  152.00  from holding Centrais Eltricas Brasileiras or generate 24.96% return on investment over 90 days.

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

Vast Renewables Limited  vs.  Centrais Eltricas Brasileiras

Vast Renewables

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vast Renewables Limited 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 rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Centrais Elétricas

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Centrais Eltricas Brasileiras are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Centrais Elétricas sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Vast Renewables and Centrais Elétricas

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

The idea behind Vast Renewables Limited 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.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.