Correlation Between Dow Jones and Centrais Electricas
Can any of the company-specific risk be diversified away by investing in both Dow Jones 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 Dow Jones and Centrais Electricas into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and Centrais Electricas Brasileiras, you can compare the effects of market volatilities on Dow Jones 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 Dow Jones with a short position of Centrais Electricas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Centrais Electricas.
Diversification Opportunities for Dow Jones and Centrais Electricas
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Dow and Centrais is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Centrais Electricas Brasileira in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centrais Electricas and Dow Jones 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 Dow Jones Industrial 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 Dow Jones i.e., Dow Jones and Centrais Electricas go up and down completely randomly.
Pair Corralation between Dow Jones and Centrais Electricas
Assuming the 90 days trading horizon Dow Jones Industrial is expected to under-perform the Centrais Electricas. But the index apears to be less risky and, when comparing its historical volatility, Dow Jones Industrial is 3.25 times less risky than Centrais Electricas. The index trades about -0.21 of its potential returns per unit of risk. The Centrais Electricas Brasileiras is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 665.00 in Centrais Electricas Brasileiras on November 28, 2024 and sell it today you would earn a total of 64.00 from holding Centrais Electricas Brasileiras or generate 9.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Dow Jones Industrial vs. Centrais Electricas Brasileira
Performance |
| Timeline |
Dow Jones and Centrais Electricas Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Centrais Electricas Brasileiras
Pair trading matchups for Centrais Electricas
Pair Trading with Dow Jones and Centrais Electricas
The main advantage of trading using opposite Dow Jones and Centrais Electricas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones 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.| Dow Jones vs. Gladstone Investment | Dow Jones vs. BW Offshore Limited | Dow Jones vs. Fidus Investment Corp | Dow Jones vs. Aperture Health |
| Centrais Electricas vs. Global Crossing Airlines | Centrais Electricas vs. Singapore Airlines | Centrais Electricas vs. United Parks Resorts | Centrais Electricas vs. China Southern Airlines |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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