Correlation Between Engie Brasil and Red Electrica
Can any of the company-specific risk be diversified away by investing in both Engie Brasil 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 Engie Brasil and Red Electrica into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Engie Brasil Energia and Red Electrica Corporacion, you can compare the effects of market volatilities on Engie Brasil 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 Engie Brasil with a short position of Red Electrica. Check out your portfolio center. Please also check ongoing floating volatility patterns of Engie Brasil and Red Electrica.
Diversification Opportunities for Engie Brasil and Red Electrica
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Engie and Red is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Engie Brasil Energia 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 Engie Brasil 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 Engie Brasil Energia 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 Engie Brasil i.e., Engie Brasil and Red Electrica go up and down completely randomly.
Pair Corralation between Engie Brasil and Red Electrica
Assuming the 90 days horizon Engie Brasil Energia is expected to under-perform the Red Electrica. In addition to that, Engie Brasil is 1.62 times more volatile than Red Electrica Corporacion. It trades about -0.04 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 788.00 in Red Electrica Corporacion on August 24, 2024 and sell it today you would earn a total of 95.00 from holding Red Electrica Corporacion or generate 12.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.6% |
| Values | Daily Returns |
Engie Brasil Energia vs. Red Electrica Corporacion
Performance |
| Timeline |
| Engie Brasil Energia |
| Red Electrica Corporacion |
Engie Brasil and Red Electrica Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Engie Brasil and Red Electrica
The main advantage of trading using opposite Engie Brasil and Red Electrica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Engie Brasil 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.| Engie Brasil vs. Red Electrica Corporacion | Engie Brasil vs. Centrais Eltricas Brasileiras | Engie Brasil vs. Centrais Electricas Brasileiras | Engie Brasil vs. Enel Chile SA |
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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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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