Correlation Between Centrais Eltricas and Alliant Energy

Can any of the company-specific risk be diversified away by investing in both Centrais Eltricas and Alliant 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 Eltricas and Alliant 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 Alliant Energy Corp, you can compare the effects of market volatilities on Centrais Eltricas and Alliant 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 Eltricas with a short position of Alliant Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Centrais Eltricas and Alliant Energy.

Diversification Opportunities for Centrais Eltricas and Alliant Energy

-0.44

Correlation Coefficient

Centrais Eltricas  Alliant Energy

Very good diversification

The 3 months correlation between Centrais and Alliant is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Centrais Eltricas Brasileiras and Alliant Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alliant Energy Corp and Centrais Eltricas 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 Alliant Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alliant Energy Corp has no effect on the direction of Centrais Eltricas i.e., Centrais Eltricas and Alliant Energy go up and down completely randomly.

Pair Corralation between Centrais Eltricas and Alliant Energy

Assuming the 90 days horizon Centrais Eltricas Brasileiras is expected to under-perform the Alliant Energy. In addition to that, Centrais Eltricas is 1.69 times more volatile than Alliant Energy Corp. It trades about -0.19 of its total potential returns per unit of risk. Alliant Energy Corp is currently generating about 0.01 per unit of volatility. If you would invest  5,982  in Alliant Energy Corp on September 17, 2024 and sell it today you would earn a total of  6.00  from holding Alliant Energy Corp or generate 0.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Centrais Eltricas Brasileiras  vs.  Alliant Energy Corp

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. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Alliant Energy Corp

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Alliant Energy Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Alliant Energy is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Centrais Eltricas and Alliant Energy

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

The idea behind Centrais Eltricas Brasileiras and Alliant Energy Corp 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..