Correlation Between Centrais Electricas and Endesa SA
Can any of the company-specific risk be diversified away by investing in both Centrais Electricas and Endesa SA 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 Endesa SA 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 Endesa SA ADR, you can compare the effects of market volatilities on Centrais Electricas and Endesa SA 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 Endesa SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Centrais Electricas and Endesa SA.
Diversification Opportunities for Centrais Electricas and Endesa SA
0.47 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Centrais and Endesa is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Centrais Electricas Brasileira and Endesa SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Endesa SA ADR 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 Endesa SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Endesa SA ADR has no effect on the direction of Centrais Electricas i.e., Centrais Electricas and Endesa SA go up and down completely randomly.
Pair Corralation between Centrais Electricas and Endesa SA
Considering the 90-day investment horizon Centrais Electricas Brasileiras is expected to under-perform the Endesa SA. In addition to that, Centrais Electricas is 1.46 times more volatile than Endesa SA ADR. It trades about -0.03 of its total potential returns per unit of risk. Endesa SA ADR is currently generating about 0.03 per unit of volatility. If you would invest 995.00 in Endesa SA ADR on August 31, 2024 and sell it today you would earn a total of 103.00 from holding Endesa SA ADR or generate 10.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Centrais Electricas Brasileira vs. Endesa SA ADR
Performance |
| Timeline |
| Centrais Electricas |
| Endesa SA ADR |
Centrais Electricas and Endesa SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Centrais Electricas and Endesa SA
The main advantage of trading using opposite Centrais Electricas and Endesa SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Centrais Electricas position performs unexpectedly, Endesa SA 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 Endesa SA will offset losses from the drop in Endesa SA'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 |
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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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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