Correlation Between Centrais Elétricas and Empresa Distribuidora
Can any of the company-specific risk be diversified away by investing in both Centrais Elétricas and Empresa Distribuidora 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 Centrais Elétricas and Empresa Distribuidora into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Centrais Eltricas Brasileiras and Empresa Distribuidora y, you can compare the effects of market volatilities on Centrais Elétricas and Empresa Distribuidora 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 Centrais Elétricas with a short position of Empresa Distribuidora. Check out your portfolio center. Please also check ongoing floating volatility patterns of Centrais Elétricas and Empresa Distribuidora.
Diversification Opportunities for Centrais Elétricas and Empresa Distribuidora
-0.83 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Centrais and Empresa is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Centrais Eltricas Brasileiras and Empresa Distribuidora y in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Empresa Distribuidora and Centrais Elétricas 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 Centrais Eltricas Brasileiras are associated (or correlated) with Empresa Distribuidora. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Empresa Distribuidora has no effect on the direction of Centrais Elétricas i.e., Centrais Elétricas and Empresa Distribuidora go up and down completely randomly.
Pair Corralation between Centrais Elétricas and Empresa Distribuidora
Assuming the 90 days horizon Centrais Eltricas Brasileiras is expected to under-perform the Empresa Distribuidora. But the stock apears to be less risky and, when comparing its historical volatility, Centrais Eltricas Brasileiras is 1.66 times less risky than Empresa Distribuidora. The stock trades about -0.19 of its potential returns per unit of risk. The Empresa Distribuidora y is currently generating about 0.56 of returns per unit of risk over similar time horizon. If you would invest 2,648 in Empresa Distribuidora y on August 27, 2024 and sell it today you would earn a total of 981.00 from holding Empresa Distribuidora y or generate 37.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Centrais Eltricas Brasileiras vs. Empresa Distribuidora y
Performance |
| Timeline |
| Centrais Elétricas |
| Empresa Distribuidora |
Centrais Elétricas and Empresa Distribuidora Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Centrais Elétricas and Empresa Distribuidora
The main advantage of trading using opposite Centrais Elétricas and Empresa Distribuidora positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Centrais Elétricas position performs unexpectedly, Empresa Distribuidora 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 Empresa Distribuidora will offset losses from the drop in Empresa Distribuidora's long position.| Centrais Elétricas vs. Nextera Energy | Centrais Elétricas vs. Consumers Energy | Centrais Elétricas vs. Duke Energy | Centrais Elétricas vs. Red Electrica Corporacion |
| Empresa Distribuidora vs. Dominion Energy | Empresa Distribuidora vs. Consolidated Edison | Empresa Distribuidora vs. Eversource Energy | Empresa Distribuidora vs. FirstEnergy |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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