Correlation Between Centrais Electricas and Red Electrica
Can any of the company-specific risk be diversified away by investing in both Centrais Electricas 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 Electricas 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 Electricas Brasileiras and Red Electrica Corporacion, you can compare the effects of market volatilities on Centrais Electricas 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 Electricas with a short position of Red Electrica. Check out your portfolio center. Please also check ongoing floating volatility patterns of Centrais Electricas and Red Electrica.
Diversification Opportunities for Centrais Electricas and Red Electrica
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Centrais and Red is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Centrais Electricas Brasileira 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 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 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 Electricas i.e., Centrais Electricas and Red Electrica go up and down completely randomly.
Pair Corralation between Centrais Electricas and Red Electrica
Considering the 90-day investment horizon Centrais Electricas Brasileiras is expected to under-perform the Red Electrica. In addition to that, Centrais Electricas is 1.08 times more volatile than Red Electrica Corporacion. It trades about -0.22 of its total potential returns per unit of risk. Red Electrica Corporacion is currently generating about -0.04 per unit of volatility. If you would invest 906.00 in Red Electrica Corporacion on August 28, 2024 and sell it today you would lose (13.00) from holding Red Electrica Corporacion or give up 1.43% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Centrais Electricas Brasileira vs. Red Electrica Corporacion
Performance |
| Timeline |
| Centrais Electricas |
| Red Electrica Corporacion |
Centrais Electricas and Red Electrica Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Centrais Electricas and Red Electrica
The main advantage of trading using opposite Centrais Electricas and Red Electrica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Centrais Electricas 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 Electricas vs. Genie Energy | Centrais Electricas vs. Central Puerto SA | Centrais Electricas vs. Korea Electric Power | Centrais Electricas vs. Empresa Distribuidora y |
| Red Electrica vs. NVIDIA | Red Electrica vs. Blacksky Technology | Red Electrica vs. Crowdstrike Holdings | Red Electrica vs. Cintas |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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