Correlation Between Consolidated Edison and Centrais Elétricas
Can any of the company-specific risk be diversified away by investing in both Consolidated Edison and Centrais Elétricas 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 Consolidated Edison and Centrais Elétricas into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Consolidated Edison and Centrais Eltricas Brasileiras, you can compare the effects of market volatilities on Consolidated Edison and Centrais Elétricas 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 Consolidated Edison with a short position of Centrais Elétricas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Consolidated Edison and Centrais Elétricas.
Diversification Opportunities for Consolidated Edison and Centrais Elétricas
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Consolidated and Centrais is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Consolidated Edison and Centrais Eltricas Brasileiras in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centrais Elétricas and Consolidated Edison 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 Consolidated Edison are associated (or correlated) with Centrais Elétricas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Centrais Elétricas has no effect on the direction of Consolidated Edison i.e., Consolidated Edison and Centrais Elétricas go up and down completely randomly.
Pair Corralation between Consolidated Edison and Centrais Elétricas
Allowing for the 90-day total investment horizon Consolidated Edison is expected to generate 1.7 times less return on investment than Centrais Elétricas. But when comparing it to its historical volatility, Consolidated Edison is 2.48 times less risky than Centrais Elétricas. It trades about 0.01 of its potential returns per unit of risk. Centrais Eltricas Brasileiras is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 696.00 in Centrais Eltricas Brasileiras on October 25, 2024 and sell it today you would lose (35.00) from holding Centrais Eltricas Brasileiras or give up 5.03% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Consolidated Edison vs. Centrais Eltricas Brasileiras
Performance |
| Timeline |
| Consolidated Edison |
| Centrais Elétricas |
Consolidated Edison and Centrais Elétricas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Consolidated Edison and Centrais Elétricas
The main advantage of trading using opposite Consolidated Edison and Centrais Elétricas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Consolidated Edison position performs unexpectedly, Centrais Elétricas 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 Centrais Elétricas will offset losses from the drop in Centrais Elétricas' long position.| Consolidated Edison vs. Duke Energy | Consolidated Edison vs. Dominion Energy | Consolidated Edison vs. American Electric Power | Consolidated Edison vs. Nextera Energy |
| Centrais Elétricas vs. Nextera Energy | Centrais Elétricas vs. Consumers Energy | Centrais Elétricas vs. Duke Energy | Centrais Elétricas vs. Red Electrica Corporacion |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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