Correlation Between Centrais Electricas and NedSense Enterprises
Can any of the company-specific risk be diversified away by investing in both Centrais Electricas and NedSense Enterprises 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 NedSense Enterprises 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 NedSense Enterprises NV, you can compare the effects of market volatilities on Centrais Electricas and NedSense Enterprises 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 NedSense Enterprises. Check out your portfolio center. Please also check ongoing floating volatility patterns of Centrais Electricas and NedSense Enterprises.
Diversification Opportunities for Centrais Electricas and NedSense Enterprises
-0.68 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Centrais and NedSense is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Centrais Electricas Brasileira and NedSense Enterprises NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NedSense Enterprises 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 NedSense Enterprises. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NedSense Enterprises has no effect on the direction of Centrais Electricas i.e., Centrais Electricas and NedSense Enterprises go up and down completely randomly.
Pair Corralation between Centrais Electricas and NedSense Enterprises
Considering the 90-day investment horizon Centrais Electricas Brasileiras is expected to generate 0.82 times more return on investment than NedSense Enterprises. However, Centrais Electricas Brasileiras is 1.23 times less risky than NedSense Enterprises. It trades about 0.35 of its potential returns per unit of risk. NedSense Enterprises NV is currently generating about -0.19 per unit of risk. If you would invest 603.00 in Centrais Electricas Brasileiras on December 9, 2024 and sell it today you would earn a total of 69.00 from holding Centrais Electricas Brasileiras or generate 11.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Centrais Electricas Brasileira vs. NedSense Enterprises NV
Performance |
| Timeline |
| Centrais Electricas |
| NedSense Enterprises |
Centrais Electricas and NedSense Enterprises Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Centrais Electricas and NedSense Enterprises
The main advantage of trading using opposite Centrais Electricas and NedSense Enterprises positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Centrais Electricas position performs unexpectedly, NedSense Enterprises 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 NedSense Enterprises will offset losses from the drop in NedSense Enterprises' long position.| Centrais Electricas vs. Genie Energy | ||
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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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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