Correlation Between Centrais Elétricas and Pinnacle West
Can any of the company-specific risk be diversified away by investing in both Centrais Elétricas and Pinnacle West 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 Pinnacle West 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 Pinnacle West Capital, you can compare the effects of market volatilities on Centrais Elétricas and Pinnacle West 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 Pinnacle West. Check out your portfolio center. Please also check ongoing floating volatility patterns of Centrais Elétricas and Pinnacle West.
Diversification Opportunities for Centrais Elétricas and Pinnacle West
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Centrais and Pinnacle is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Centrais Eltricas Brasileiras and Pinnacle West Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pinnacle West Capital 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 Pinnacle West. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pinnacle West Capital has no effect on the direction of Centrais Elétricas i.e., Centrais Elétricas and Pinnacle West go up and down completely randomly.
Pair Corralation between Centrais Elétricas and Pinnacle West
Assuming the 90 days horizon Centrais Elétricas is expected to generate 9.0 times less return on investment than Pinnacle West. In addition to that, Centrais Elétricas is 2.19 times more volatile than Pinnacle West Capital. It trades about 0.0 of its total potential returns per unit of risk. Pinnacle West Capital is currently generating about 0.05 per unit of volatility. If you would invest 7,220 in Pinnacle West Capital on August 31, 2024 and sell it today you would earn a total of 2,232 from holding Pinnacle West Capital or generate 30.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Centrais Eltricas Brasileiras vs. Pinnacle West Capital
Performance |
| Timeline |
| Centrais Elétricas |
| Pinnacle West Capital |
Centrais Elétricas and Pinnacle West Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Centrais Elétricas and Pinnacle West
The main advantage of trading using opposite Centrais Elétricas and Pinnacle West positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Centrais Elétricas position performs unexpectedly, Pinnacle West 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 Pinnacle West will offset losses from the drop in Pinnacle West's long position.| Centrais Elétricas vs. Nextera Energy | Centrais Elétricas vs. Consumers Energy | Centrais Elétricas vs. Duke Energy | Centrais Elétricas vs. Centrais Electricas Brasileiras |
| Pinnacle West vs. CenterPoint Energy | Pinnacle West vs. CMS Energy | Pinnacle West vs. IDACORP | Pinnacle West vs. Portland General Electric |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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