Correlation Between Centrais Elétricas and Red Electrica
Can any of the company-specific risk be diversified away by investing in both Centrais Elétricas and Red Electrica 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 Red Electrica 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 Red Electrica Corporacion, you can compare the effects of market volatilities on Centrais Elétricas and Red Electrica 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 Red Electrica. Check out your portfolio center. Please also check ongoing floating volatility patterns of Centrais Elétricas and Red Electrica.
Diversification Opportunities for Centrais Elétricas and Red Electrica
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Centrais and Red is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Centrais Eltricas Brasileiras and Red Electrica Corporacion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Red Electrica Corporacion 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 Red Electrica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Red Electrica Corporacion has no effect on the direction of Centrais Elétricas i.e., Centrais Elétricas and Red Electrica go up and down completely randomly.
Pair Corralation between Centrais Elétricas and Red Electrica
Assuming the 90 days horizon Centrais Eltricas Brasileiras is expected to generate 2.28 times more return on investment than Red Electrica. However, Centrais Elétricas is 2.28 times more volatile than Red Electrica Corporacion. It trades about 0.01 of its potential returns per unit of risk. Red Electrica Corporacion is currently generating about 0.01 per unit of risk. If you would invest 696.00 in Centrais Eltricas Brasileiras on October 25, 2024 and sell it today you would lose (35.00) from holding Centrais Eltricas Brasileiras or give up 5.03% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Centrais Eltricas Brasileiras vs. Red Electrica Corporacion
Performance |
| Timeline |
| Centrais Elétricas |
| Red Electrica Corporacion |
Centrais Elétricas and Red Electrica Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Centrais Elétricas and Red Electrica
The main advantage of trading using opposite Centrais Elétricas and Red Electrica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Centrais Elétricas position performs unexpectedly, Red Electrica 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 Red Electrica will offset losses from the drop in Red Electrica's long position.| Centrais Elétricas vs. Nextera Energy | Centrais Elétricas vs. Consumers Energy | Centrais Elétricas vs. Duke Energy | Centrais Elétricas vs. Red Electrica Corporacion |
| Red Electrica vs. Engie Brasil Energia | Red Electrica vs. Centrais Eltricas Brasileiras | Red Electrica vs. Centrais Electricas Brasileiras | Red Electrica vs. Ameren Corp |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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