Correlation Between Elektro Redes and Rio Paranapanema
Can any of the company-specific risk be diversified away by investing in both Elektro Redes and Rio Paranapanema 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 Elektro Redes and Rio Paranapanema into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Elektro Redes SA and Rio Paranapanema Energia, you can compare the effects of market volatilities on Elektro Redes and Rio Paranapanema 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 Elektro Redes with a short position of Rio Paranapanema. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elektro Redes and Rio Paranapanema.
Diversification Opportunities for Elektro Redes and Rio Paranapanema
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Elektro and Rio is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Elektro Redes SA and Rio Paranapanema Energia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rio Paranapanema Energia and Elektro Redes 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 Elektro Redes SA are associated (or correlated) with Rio Paranapanema. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rio Paranapanema Energia has no effect on the direction of Elektro Redes i.e., Elektro Redes and Rio Paranapanema go up and down completely randomly.
Pair Corralation between Elektro Redes and Rio Paranapanema
Assuming the 90 days trading horizon Elektro Redes SA is expected to generate 1.09 times more return on investment than Rio Paranapanema. However, Elektro Redes is 1.09 times more volatile than Rio Paranapanema Energia. It trades about 0.08 of its potential returns per unit of risk. Rio Paranapanema Energia is currently generating about 0.07 per unit of risk. If you would invest 3,600 in Elektro Redes SA on September 3, 2024 and sell it today you would earn a total of 1,100 from holding Elektro Redes SA or generate 30.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 97.64% |
| Values | Daily Returns |
Elektro Redes SA vs. Rio Paranapanema Energia
Performance |
| Timeline |
| Elektro Redes SA |
| Rio Paranapanema Energia |
Elektro Redes and Rio Paranapanema Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Elektro Redes and Rio Paranapanema
The main advantage of trading using opposite Elektro Redes and Rio Paranapanema positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Elektro Redes position performs unexpectedly, Rio Paranapanema 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 Rio Paranapanema will offset losses from the drop in Rio Paranapanema's long position.| Elektro Redes vs. Empresa Metropolitana de | Elektro Redes vs. Companhiade Eletricidade do | Elektro Redes vs. Rio Paranapanema Energia | Elektro Redes vs. Energisa SA |
| Rio Paranapanema vs. Usinas Siderrgicas de | Rio Paranapanema vs. Companhia Siderrgica Nacional | Rio Paranapanema vs. Gerdau SA | Rio Paranapanema vs. Companhia Paranaense de |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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