Question

Determine whether the performance of your foreign stock(Eletrobras. ticker: EBR) is driven by the corresponding market where the firm is based (^BVSP). compare and assess the relationship between the Market index movements in the stocks price movements. Explain whether the stocks price movements appear to be driven by the local market conditions.

EBR 8.12 BVSP 107708.00 X yahoo Finance 25.00% 20.00% 15.00% 10.08% 5.00% 0.00% -5.00% 10.75% 14 Aug 14 Sep - NOV 14 Dei

please answer based on the chart given thank you

Answer 1

stock: Eletrobras. ticker: EBR
Market: BVSP

There seems to be a very weak correlation between the stock and the market because:

There are 2 cross lines one in mid-July and second after mid-September. Essentially dividing the entire chart into three parts.

1.Between start and mid-July:
There seems to a correlation between stock and market because as the market is going up, the stock is also going up.

2.Between mid-July and after mid-September.
There is a negative correlation between market and stock, this can be established by the fact that after mid-August as the market went down, the stock went up.
At the mid-September, as the market is going up, the stock is going down.

3.Between mid-September and end: There is a weak correlation between market and stock as there is a mixed trend.

So the stock and market seem to have a weak correlation.