Correlation Between Red Electrica and Centrais Electricas
Can any of the company-specific risk be diversified away by investing in both Red Electrica 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 Red Electrica and Centrais Electricas into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Red Electrica Corporacion and Centrais Electricas Brasileiras, you can compare the effects of market volatilities on Red Electrica 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 Red Electrica with a short position of Centrais Electricas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Red Electrica and Centrais Electricas.
Diversification Opportunities for Red Electrica and Centrais Electricas
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Red and Centrais is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Red Electrica Corporacion and Centrais Electricas Brasileira in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centrais Electricas and Red Electrica 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 Red Electrica Corporacion 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 Red Electrica i.e., Red Electrica and Centrais Electricas go up and down completely randomly.
Pair Corralation between Red Electrica and Centrais Electricas
Assuming the 90 days horizon Red Electrica Corporacion is expected to generate 0.93 times more return on investment than Centrais Electricas. However, Red Electrica Corporacion is 1.08 times less risky than Centrais Electricas. It trades about -0.04 of its potential returns per unit of risk. Centrais Electricas Brasileiras is currently generating about -0.22 per unit of risk. If you would invest 906.00 in Red Electrica Corporacion on August 28, 2024 and sell it today you would lose (13.00) from holding Red Electrica Corporacion or give up 1.43% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Red Electrica Corporacion vs. Centrais Electricas Brasileira
Performance |
| Timeline |
| Red Electrica Corporacion |
| Centrais Electricas |
Red Electrica and Centrais Electricas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Red Electrica and Centrais Electricas
The main advantage of trading using opposite Red Electrica and Centrais Electricas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Red Electrica 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.| Red Electrica vs. NVIDIA | Red Electrica vs. Blacksky Technology | Red Electrica vs. Crowdstrike Holdings | Red Electrica vs. Cintas |
| 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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