Correlation Between Centrais Electricas and Entergy Texas

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

Diversification Opportunities for Centrais Electricas and Entergy Texas

-0.04

Correlation Coefficient

Centrais Electricas  Entergy Texas

Good diversification

The 3 months correlation between Centrais and Entergy is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Centrais Electricas Brasileira and Entergy Texas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Entergy Texas 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 Entergy Texas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Entergy Texas has no effect on the direction of Centrais Electricas i.e., Centrais Electricas and Entergy Texas go up and down completely randomly.

Pair Corralation between Centrais Electricas and Entergy Texas

Considering the 90-day investment horizon Centrais Electricas Brasileiras is expected to under-perform the Entergy Texas. In addition to that, Centrais Electricas is 1.79 times more volatile than Entergy Texas. It trades about -0.1 of its total potential returns per unit of risk. Entergy Texas is currently generating about -0.17 per unit of volatility. If you would invest  2,471  in Entergy Texas on February 5, 2024 and sell it today you would lose (97.00) from holding Entergy Texas or give up 3.93% of portfolio value over 90 days.

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

Centrais Electricas Brasileira  vs.  Entergy Texas

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 relatively invariable fundamental drivers, Centrais Electricas is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Entergy Texas

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Entergy Texas are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Entergy Texas is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Centrais Electricas and Entergy Texas

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

The idea behind Centrais Electricas Brasileiras and Entergy Texas 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.