Correlation Between Centrais Electricas and Consolidated Edison
Can any of the company-specific risk be diversified away by investing in both Centrais Electricas and Consolidated Edison 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 Electricas and Consolidated Edison into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Centrais Electricas Brasileiras and Consolidated Edison, you can compare the effects of market volatilities on Centrais Electricas and Consolidated Edison 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 Electricas with a short position of Consolidated Edison. Check out your portfolio center. Please also check ongoing floating volatility patterns of Centrais Electricas and Consolidated Edison.
Diversification Opportunities for Centrais Electricas and Consolidated Edison
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Centrais and Consolidated is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Centrais Electricas Brasileira and Consolidated Edison in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consolidated Edison and Centrais Electricas 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 Electricas Brasileiras are associated (or correlated) with Consolidated Edison. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Consolidated Edison has no effect on the direction of Centrais Electricas i.e., Centrais Electricas and Consolidated Edison go up and down completely randomly.
Pair Corralation between Centrais Electricas and Consolidated Edison
Considering the 90-day investment horizon Centrais Electricas Brasileiras is expected to under-perform the Consolidated Edison. In addition to that, Centrais Electricas is 1.91 times more volatile than Consolidated Edison. It trades about -0.01 of its total potential returns per unit of risk. Consolidated Edison is currently generating about 0.01 per unit of volatility. If you would invest 8,665 in Consolidated Edison on October 25, 2024 and sell it today you would earn a total of 411.00 from holding Consolidated Edison or generate 4.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Centrais Electricas Brasileira vs. Consolidated Edison
Performance |
| Timeline |
| Centrais Electricas |
| Consolidated Edison |
Centrais Electricas and Consolidated Edison Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Centrais Electricas and Consolidated Edison
The main advantage of trading using opposite Centrais Electricas and Consolidated Edison positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Centrais Electricas position performs unexpectedly, Consolidated Edison 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 Consolidated Edison will offset losses from the drop in Consolidated Edison's long position.| Centrais Electricas vs. Genie Energy | Centrais Electricas vs. Central Puerto SA | Centrais Electricas vs. Korea Electric Power | Centrais Electricas vs. Empresa Distribuidora y |
| Consolidated Edison vs. Duke Energy | Consolidated Edison vs. Dominion Energy | Consolidated Edison vs. American Electric Power | Consolidated Edison vs. Nextera Energy |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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