Correlation Between Pinnacle West and Centrais Electricas
Can any of the company-specific risk be diversified away by investing in both Pinnacle West and Centrais Electricas 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 Pinnacle West and Centrais Electricas into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pinnacle West Capital and Centrais Electricas Brasileiras, you can compare the effects of market volatilities on Pinnacle West and Centrais Electricas 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 Pinnacle West with a short position of Centrais Electricas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pinnacle West and Centrais Electricas.
Diversification Opportunities for Pinnacle West and Centrais Electricas
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Pinnacle and Centrais is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Pinnacle West Capital and Centrais Electricas Brasileira in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centrais Electricas and Pinnacle West 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 Pinnacle West Capital are associated (or correlated) with Centrais Electricas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Centrais Electricas has no effect on the direction of Pinnacle West i.e., Pinnacle West and Centrais Electricas go up and down completely randomly.
Pair Corralation between Pinnacle West and Centrais Electricas
Considering the 90-day investment horizon Pinnacle West Capital is expected to generate 0.64 times more return on investment than Centrais Electricas. However, Pinnacle West Capital is 1.57 times less risky than Centrais Electricas. It trades about 0.1 of its potential returns per unit of risk. Centrais Electricas Brasileiras is currently generating about -0.06 per unit of risk. If you would invest 7,105 in Pinnacle West Capital on August 24, 2024 and sell it today you would earn a total of 2,231 from holding Pinnacle West Capital or generate 31.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pinnacle West Capital vs. Centrais Electricas Brasileira
Performance |
| Timeline |
| Pinnacle West Capital |
| Centrais Electricas |
Pinnacle West and Centrais Electricas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pinnacle West and Centrais Electricas
The main advantage of trading using opposite Pinnacle West and Centrais Electricas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pinnacle West position performs unexpectedly, Centrais Electricas 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 Electricas will offset losses from the drop in Centrais Electricas' long position.| Pinnacle West vs. Korea Electric Power | Pinnacle West vs. Centrais Electricas Brasileiras | Pinnacle West vs. MGE Energy | Pinnacle West vs. IDACORP |
| Centrais Electricas vs. Genie Energy | Centrais Electricas vs. Central Puerto SA | Centrais Electricas vs. Korea Electric Power | Centrais Electricas vs. Empresa Distribuidora y |
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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