Correlation Between Centrais Electricas and Southern
Can any of the company-specific risk be diversified away by investing in both Centrais Electricas 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 Electricas and Southern 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 Southern Company, you can compare the effects of market volatilities on Centrais Electricas 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 Electricas with a short position of Southern. Check out your portfolio center. Please also check ongoing floating volatility patterns of Centrais Electricas and Southern.
Diversification Opportunities for Centrais Electricas and Southern
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Centrais and Southern is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Centrais Electricas Brasileira and Southern Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern 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 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 Electricas i.e., Centrais Electricas and Southern go up and down completely randomly.
Pair Corralation between Centrais Electricas and Southern
Considering the 90-day investment horizon Centrais Electricas Brasileiras is expected to generate 1.35 times more return on investment than Southern. However, Centrais Electricas is 1.35 times more volatile than Southern Company. It trades about 0.18 of its potential returns per unit of risk. Southern Company is currently generating about -0.01 per unit of risk. If you would invest 563.00 in Centrais Electricas Brasileiras on October 26, 2024 and sell it today you would earn a total of 29.00 from holding Centrais Electricas Brasileiras or generate 5.15% 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. Southern Company
Performance |
| Timeline |
| Centrais Electricas |
| Southern |
Centrais Electricas and Southern Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Centrais Electricas and Southern
The main advantage of trading using opposite Centrais Electricas and Southern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Centrais Electricas 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 Electricas vs. Genie Energy | Centrais Electricas vs. Central Puerto SA | Centrais Electricas vs. Korea Electric Power | Centrais Electricas vs. Empresa Distribuidora y |
| 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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