Correlation Between Montauk Renewables and Centrais Electricas

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

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

Diversification Opportunities for Montauk Renewables and Centrais Electricas

0.02

Correlation Coefficient

Montauk Renewables  Centrais Electricas

Significant diversification

The 3 months correlation between Montauk and Centrais is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Montauk Renewables and Centrais Electricas Brasileira in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centrais Electricas and Montauk Renewables 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 Montauk Renewables 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 Montauk Renewables i.e., Montauk Renewables and Centrais Electricas go up and down completely randomly.

Pair Corralation between Montauk Renewables and Centrais Electricas

Given the investment horizon of 90 days Montauk Renewables is expected to generate 3.59 times more return on investment than Centrais Electricas. However, Montauk Renewables is 3.59 times more volatile than Centrais Electricas Brasileiras. It trades about 0.01 of its potential returns per unit of risk. Centrais Electricas Brasileiras is currently generating about -0.08 per unit of risk. If you would invest  224.00  in Montauk Renewables on May 7, 2025 and sell it today you would lose (14.00) from holding Montauk Renewables or give up 6.25% of portfolio value over 90 days.

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

Montauk Renewables  vs.  Centrais Electricas Brasileira

Montauk Renewables

Risk-Adjusted Performance

Weakest

Over the last 90 days Montauk Renewables has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Montauk Renewables is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Centrais Electricas

Risk-Adjusted Performance

Weakest

Over the last 90 days Centrais Electricas Brasileiras has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unsteady performance, the Stock's fundamental drivers 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 Montauk Renewables and Centrais Electricas

The main advantage of trading using opposite Montauk Renewables and Centrais Electricas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Montauk Renewables 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 Montauk Renewables 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.