Correlation Between Basic Materials and Centrais Eltricas
Can any of the company-specific risk be diversified away by investing in both Basic Materials and Centrais Eltricas 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 Basic Materials and Centrais Eltricas into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Basic Materials and Centrais Eltricas Brasileiras, you can compare the effects of market volatilities on Basic Materials and Centrais Eltricas 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 Basic Materials with a short position of Centrais Eltricas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Basic Materials and Centrais Eltricas.
Diversification Opportunities for Basic Materials and Centrais Eltricas
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Basic and Centrais is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Basic Materials and Centrais Eltricas Brasileiras in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centrais Eltricas and Basic Materials 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 Basic Materials are associated (or correlated) with Centrais Eltricas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Centrais Eltricas has no effect on the direction of Basic Materials i.e., Basic Materials and Centrais Eltricas go up and down completely randomly.
Pair Corralation between Basic Materials and Centrais Eltricas
Assuming the 90 days trading horizon Basic Materials is expected to under-perform the Centrais Eltricas. In addition to that, Basic Materials is 1.65 times more volatile than Centrais Eltricas Brasileiras. It trades about -0.19 of its total potential returns per unit of risk. Centrais Eltricas Brasileiras is currently generating about 0.05 per unit of volatility. If you would invest 4,494 in Centrais Eltricas Brasileiras on January 23, 2025 and sell it today you would earn a total of 44.00 from holding Centrais Eltricas Brasileiras or generate 0.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Basic Materials vs. Centrais Eltricas Brasileiras
Performance |
| Timeline |
Basic Materials and Centrais Eltricas Volatility Contrast
Predicted Return Density |
| Returns |
Basic Materials
Pair trading matchups for Basic Materials
Centrais Eltricas Brasileiras
Pair trading matchups for Centrais Eltricas
Pair Trading with Basic Materials and Centrais Eltricas
The main advantage of trading using opposite Basic Materials and Centrais Eltricas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Basic Materials position performs unexpectedly, Centrais Eltricas 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 Eltricas will offset losses from the drop in Centrais Eltricas' long position.| Basic Materials vs. United Natural Foods, | Basic Materials vs. Broadridge Financial Solutions, | Basic Materials vs. JB Hunt Transport | Basic Materials vs. Metalfrio Solutions SA |
| Centrais Eltricas vs. Centrais Eltricas Brasileiras | Centrais Eltricas vs. Companhia Energtica de | Centrais Eltricas vs. Companhia Paranaense de | Centrais Eltricas vs. Companhia de Saneamento |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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