Correlation Between Centrais Elétricas and Genie Energy

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

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

Diversification Opportunities for Centrais Elétricas and Genie Energy

0.64

Correlation Coefficient

Centrais Elétricas  Genie Energy

Poor diversification

The 3 months correlation between Centrais and Genie is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Centrais Eltricas Brasileiras and Genie Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Genie Energy and Centrais Elétricas 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 Centrais Eltricas Brasileiras are associated (or correlated) with Genie Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Genie Energy has no effect on the direction of Centrais Elétricas i.e., Centrais Elétricas and Genie Energy go up and down completely randomly.

Pair Corralation between Centrais Elétricas and Genie Energy

Assuming the 90 days horizon Centrais Eltricas Brasileiras is expected to under-perform the Genie Energy. But the stock apears to be less risky and, when comparing its historical volatility, Centrais Eltricas Brasileiras is 1.11 times less risky than Genie Energy. The stock trades about -0.16 of its potential returns per unit of risk. The Genie Energy is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  1,666  in Genie Energy on August 30, 2024 and sell it today you would lose (116.00) from holding Genie Energy or give up 6.96% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Centrais Eltricas Brasileiras  vs.  Genie Energy

Centrais Elétricas

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. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Genie Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Genie Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Genie Energy is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Centrais Elétricas and Genie Energy

The main advantage of trading using opposite Centrais Elétricas and Genie Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Centrais Elétricas position performs unexpectedly, Genie Energy 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 Genie Energy will offset losses from the drop in Genie Energy's long position.

The idea behind Centrais Eltricas Brasileiras and Genie Energy 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.