Correlation Between PGE Corp and Centrais Electricas

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

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

Diversification Opportunities for PGE Corp and Centrais Electricas

-0.49

Correlation Coefficient

PGE Corp  Centrais Electricas

Very good diversification

The 3 months correlation between PGE and Centrais is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding PGE Corp and Centrais Electricas Brasileira in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centrais Electricas and PGE Corp 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 PGE Corp are associated (or correlated) with Centrais Electricas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Centrais Electricas has no effect on the direction of PGE Corp i.e., PGE Corp and Centrais Electricas go up and down completely randomly.

Pair Corralation between PGE Corp and Centrais Electricas

If you would invest  15,684  in PGE Corp on September 4, 2024 and sell it today you would earn a total of  0.00  from holding PGE Corp or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	0.41%
Values	Daily Returns

PGE Corp  vs.  Centrais Electricas Brasileira

PGE Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

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 unsteady performance in the last few months, the Stock's fundamental drivers remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with PGE Corp and Centrais Electricas

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

The idea behind PGE Corp and Centrais Electricas Brasileiras 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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.