Correlation Between Centrais Electricas and OGE Energy

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

Diversification Opportunities for Centrais Electricas and OGE Energy

-0.79

Correlation Coefficient

Centrais Electricas  OGE Energy

Pay attention - limited upside

The 3 months correlation between Centrais and OGE is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Centrais Electricas Brasileira and OGE Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OGE Energy 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 OGE Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OGE Energy has no effect on the direction of Centrais Electricas i.e., Centrais Electricas and OGE Energy go up and down completely randomly.

Pair Corralation between Centrais Electricas and OGE Energy

Considering the 90-day investment horizon Centrais Electricas Brasileiras is expected to under-perform the OGE Energy. In addition to that, Centrais Electricas is 1.65 times more volatile than OGE Energy. It trades about -0.18 of its total potential returns per unit of risk. OGE Energy is currently generating about 0.18 per unit of volatility. If you would invest  3,929  in OGE Energy on August 31, 2024 and sell it today you would earn a total of  479.00  from holding OGE Energy or generate 12.19% 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.  OGE Energy

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.

OGE Energy

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in OGE Energy are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, OGE Energy may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Centrais Electricas and OGE Energy

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

The idea behind Centrais Electricas Brasileiras and OGE 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.