Correlation Between Centrais Elétricas and Southern
Can any of the company-specific risk be diversified away by investing in both Centrais Elétricas and Southern 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 Southern 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 Southern Company, you can compare the effects of market volatilities on Centrais Elétricas and Southern 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 Southern. Check out your portfolio center. Please also check ongoing floating volatility patterns of Centrais Elétricas and Southern.
Diversification Opportunities for Centrais Elétricas and Southern
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between Centrais and Southern is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Centrais Eltricas Brasileiras and Southern Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern 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 Southern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern has no effect on the direction of Centrais Elétricas i.e., Centrais Elétricas and Southern go up and down completely randomly.
Pair Corralation between Centrais Elétricas and Southern
Assuming the 90 days horizon Centrais Eltricas Brasileiras is expected to under-perform the Southern. In addition to that, Centrais Elétricas is 2.28 times more volatile than Southern Company. It trades about -0.02 of its total potential returns per unit of risk. Southern Company is currently generating about 0.07 per unit of volatility. If you would invest 6,718 in Southern Company on August 31, 2024 and sell it today you would earn a total of 2,195 from holding Southern Company or generate 32.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Centrais Eltricas Brasileiras vs. Southern Company
Performance |
| Timeline |
| Centrais Elétricas |
| Southern |
Centrais Elétricas and Southern Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Centrais Elétricas and Southern
The main advantage of trading using opposite Centrais Elétricas and Southern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Centrais Elétricas position performs unexpectedly, Southern 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 Southern will offset losses from the drop in Southern's long position.| Centrais Elétricas vs. Nextera Energy | Centrais Elétricas vs. Consumers Energy | Centrais Elétricas vs. Duke Energy | Centrais Elétricas vs. Centrais Electricas Brasileiras |
| Southern vs. Dominion Energy | Southern vs. American Electric Power | Southern vs. Nextera Energy | Southern vs. Consolidated Edison |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
Other Complementary Tools
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
| CEOs Directory Screen CEOs from public companies around the world | |
| Insider Screener Find insiders across different sectors to evaluate their impact on performance | |
| Analyst Advice Analyst recommendations and target price estimates broken down by several categories | |
| Bonds Directory Find actively traded corporate debentures issued by US companies |