Correlation Between Central Puerto and Centrais Eltricas

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

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

Diversification Opportunities for Central Puerto and Centrais Eltricas

-0.86

Correlation Coefficient

Central Puerto  Centrais Eltricas

Pay attention - limited upside

The 3 months correlation between Central and Centrais is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Central Puerto SA and Centrais Eltricas Brasileiras in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centrais Eltricas and Central Puerto 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 Central Puerto SA are associated (or correlated) with Centrais Eltricas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Centrais Eltricas has no effect on the direction of Central Puerto i.e., Central Puerto and Centrais Eltricas go up and down completely randomly.

Pair Corralation between Central Puerto and Centrais Eltricas

Given the investment horizon of 90 days Central Puerto SA is expected to generate 1.01 times more return on investment than Centrais Eltricas. However, Central Puerto is 1.01 times more volatile than Centrais Eltricas Brasileiras. It trades about 0.29 of its potential returns per unit of risk. Centrais Eltricas Brasileiras is currently generating about -0.17 per unit of risk. If you would invest  1,047  in Central Puerto SA on September 15, 2024 and sell it today you would earn a total of  473.00  from holding Central Puerto SA or generate 45.18% return on investment over 90 days.

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

Central Puerto SA  vs.  Centrais Eltricas Brasileiras

Central Puerto SA

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Central Puerto SA are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Central Puerto unveiled solid returns over the last few months and may actually be approaching a breakup point.

Centrais Eltricas

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Centrais Eltricas Brasileiras has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat 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.

Pair Trading with Central Puerto and Centrais Eltricas

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

The idea behind Central Puerto SA and Centrais Eltricas 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.