Correlation Between Engie Brasil and Korea Electric

Can any of the company-specific risk be diversified away by investing in both Engie Brasil and Korea Electric 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 Engie Brasil and Korea Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Engie Brasil Energia and Korea Electric Power, you can compare the effects of market volatilities on Engie Brasil and Korea Electric 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 Engie Brasil with a short position of Korea Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Engie Brasil and Korea Electric.

Diversification Opportunities for Engie Brasil and Korea Electric

-0.27

Correlation Coefficient

Engie Brasil  Korea Electric

Very good diversification

The 3 months correlation between Engie and Korea is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Engie Brasil Energia and Korea Electric Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Korea Electric Power and Engie Brasil 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 Engie Brasil Energia are associated (or correlated) with Korea Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Korea Electric Power has no effect on the direction of Engie Brasil i.e., Engie Brasil and Korea Electric go up and down completely randomly.

Pair Corralation between Engie Brasil and Korea Electric

Assuming the 90 days horizon Engie Brasil Energia is expected to under-perform the Korea Electric. But the pink sheet apears to be less risky and, when comparing its historical volatility, Engie Brasil Energia is 1.14 times less risky than Korea Electric. The pink sheet trades about -0.16 of its potential returns per unit of risk. The Korea Electric Power is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  822.00  in Korea Electric Power on September 12, 2024 and sell it today you would lose (67.00) from holding Korea Electric Power or give up 8.15% of portfolio value over 90 days.

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

Engie Brasil Energia  vs.  Korea Electric Power

Engie Brasil Energia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Engie Brasil Energia has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain fairly 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.

Korea Electric Power

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Korea Electric Power has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's technical and fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Engie Brasil and Korea Electric

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

The idea behind Engie Brasil Energia and Korea Electric Power 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.

Check out your portfolio center.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.