Correlation Between Centrais Electricas and Franklin Utilities

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

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

Diversification Opportunities for Centrais Electricas and Franklin Utilities

-0.72

Correlation Coefficient

Centrais Electricas  Franklin Utilities

Pay attention - limited upside

The 3 months correlation between Centrais and Franklin is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Centrais Electricas Brasileira and Franklin Utilities Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Utilities and Centrais Electricas 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 Electricas Brasileiras are associated (or correlated) with Franklin Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Utilities has no effect on the direction of Centrais Electricas i.e., Centrais Electricas and Franklin Utilities go up and down completely randomly.

Pair Corralation between Centrais Electricas and Franklin Utilities

Considering the 90-day investment horizon Centrais Electricas Brasileiras is expected to under-perform the Franklin Utilities. In addition to that, Centrais Electricas is 1.94 times more volatile than Franklin Utilities Fund. It trades about -0.18 of its total potential returns per unit of risk. Franklin Utilities Fund is currently generating about 0.18 per unit of volatility. If you would invest  2,367  in Franklin Utilities Fund on August 31, 2024 and sell it today you would earn a total of  258.00  from holding Franklin Utilities Fund or generate 10.9% return on investment over 90 days.

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

Centrais Electricas Brasileira  vs.  Franklin Utilities Fund

Centrais Electricas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Centrais Electricas Brasileiras has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's fundamental drivers remain relatively invariable which may send shares a bit higher in December 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Franklin Utilities

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Utilities Fund are ranked lower than 14 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Franklin Utilities may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Centrais Electricas and Franklin Utilities

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

The idea behind Centrais Electricas Brasileiras and Franklin Utilities Fund 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.