Correlation Between Rede Energia and Centrais Eltricas
Can any of the company-specific risk be diversified away by investing in both Rede Energia 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 Rede Energia and Centrais Eltricas into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rede Energia Participaes and Centrais Eltricas Brasileiras, you can compare the effects of market volatilities on Rede Energia 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 Rede Energia with a short position of Centrais Eltricas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rede Energia and Centrais Eltricas.
Diversification Opportunities for Rede Energia and Centrais Eltricas
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Rede and Centrais is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Rede Energia Participaes and Centrais Eltricas Brasileiras in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centrais Eltricas and Rede Energia 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 Rede Energia Participaes 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 Rede Energia i.e., Rede Energia and Centrais Eltricas go up and down completely randomly.
Pair Corralation between Rede Energia and Centrais Eltricas
Assuming the 90 days trading horizon Rede Energia Participaes is expected to generate 3.62 times more return on investment than Centrais Eltricas. However, Rede Energia is 3.62 times more volatile than Centrais Eltricas Brasileiras. It trades about 0.02 of its potential returns per unit of risk. Centrais Eltricas Brasileiras is currently generating about -0.1 per unit of risk. If you would invest 625.00 in Rede Energia Participaes on September 1, 2024 and sell it today you would earn a total of 32.00 from holding Rede Energia Participaes or generate 5.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.44% |
| Values | Daily Returns |
Rede Energia Participaes vs. Centrais Eltricas Brasileiras
Performance |
| Timeline |
| Rede Energia Participaes |
| Centrais Eltricas |
Rede Energia and Centrais Eltricas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rede Energia and Centrais Eltricas
The main advantage of trading using opposite Rede Energia and Centrais Eltricas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rede Energia 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.| Rede Energia vs. Centrais Eltricas Brasileiras | Rede Energia vs. Transmissora Aliana de | Rede Energia vs. CPFL Energia SA | Rede Energia vs. Engie Brasil Energia |
| Centrais Eltricas vs. NextEra Energy | Centrais Eltricas vs. Dominion Energy | Centrais Eltricas vs. Transmissora Aliana de | Centrais Eltricas vs. CPFL Energia SA |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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