Correlation Between Companhia Siderrgica and Centrais Eltricas

Can any of the company-specific risk be diversified away by investing in both Companhia Siderrgica 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 Companhia Siderrgica and Centrais Eltricas into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Companhia Siderrgica Nacional and Centrais Eltricas Brasileiras, you can compare the effects of market volatilities on Companhia Siderrgica 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 Companhia Siderrgica with a short position of Centrais Eltricas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Companhia Siderrgica and Centrais Eltricas.

Diversification Opportunities for Companhia Siderrgica and Centrais Eltricas

0.12

Correlation Coefficient

Companhia Siderrgica  Centrais Eltricas

Average diversification

The 3 months correlation between Companhia and Centrais is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Companhia Siderrgica Nacional and Centrais Eltricas Brasileiras in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centrais Eltricas and Companhia Siderrgica 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 Companhia Siderrgica Nacional 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 Companhia Siderrgica i.e., Companhia Siderrgica and Centrais Eltricas go up and down completely randomly.

Pair Corralation between Companhia Siderrgica and Centrais Eltricas

Assuming the 90 days trading horizon Companhia Siderrgica Nacional is expected to generate 2.29 times more return on investment than Centrais Eltricas. However, Companhia Siderrgica is 2.29 times more volatile than Centrais Eltricas Brasileiras. It trades about 0.03 of its potential returns per unit of risk. Centrais Eltricas Brasileiras is currently generating about -0.25 per unit of risk. If you would invest  1,085  in Companhia Siderrgica Nacional on September 4, 2024 and sell it today you would earn a total of  33.00  from holding Companhia Siderrgica Nacional or generate 3.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.41%
Values	Daily Returns

Companhia Siderrgica Nacional  vs.  Centrais Eltricas Brasileiras

Companhia Siderrgica

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Companhia Siderrgica Nacional are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Companhia Siderrgica is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Centrais Eltricas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Centrais Eltricas Brasileiras has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Companhia Siderrgica and Centrais Eltricas

The main advantage of trading using opposite Companhia Siderrgica and Centrais Eltricas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Companhia Siderrgica 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.

The idea behind Companhia Siderrgica Nacional and Centrais Eltricas Brasileiras pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.