Correlation Between Alupar Investimento and Companhia
Can any of the company-specific risk be diversified away by investing in both Alupar Investimento and Companhia 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 Alupar Investimento and Companhia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alupar Investimento SA and Companhia de Saneamento, you can compare the effects of market volatilities on Alupar Investimento and Companhia 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 Alupar Investimento with a short position of Companhia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alupar Investimento and Companhia.
Diversification Opportunities for Alupar Investimento and Companhia
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Alupar and Companhia is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Alupar Investimento SA and Companhia de Saneamento in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Companhia de Saneamento and Alupar Investimento 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 Alupar Investimento SA are associated (or correlated) with Companhia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Companhia de Saneamento has no effect on the direction of Alupar Investimento i.e., Alupar Investimento and Companhia go up and down completely randomly.
Pair Corralation between Alupar Investimento and Companhia
Assuming the 90 days trading horizon Alupar Investimento SA is expected to under-perform the Companhia. But the stock apears to be less risky and, when comparing its historical volatility, Alupar Investimento SA is 1.09 times less risky than Companhia. The stock trades about -0.12 of its potential returns per unit of risk. The Companhia de Saneamento is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 2,703 in Companhia de Saneamento on August 30, 2024 and sell it today you would earn a total of 81.00 from holding Companhia de Saneamento or generate 3.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alupar Investimento SA vs. Companhia de Saneamento
Performance |
| Timeline |
| Alupar Investimento |
| Companhia de Saneamento |
Alupar Investimento and Companhia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alupar Investimento and Companhia
The main advantage of trading using opposite Alupar Investimento and Companhia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alupar Investimento position performs unexpectedly, Companhia 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 Companhia will offset losses from the drop in Companhia's long position.| Alupar Investimento vs. WEG SA | Alupar Investimento vs. Fleury SA | Alupar Investimento vs. BB Seguridade Participacoes |
| Companhia vs. BB Seguridade Participacoes | Companhia vs. Transmissora Aliana de | Companhia vs. Alupar Investimento SA | Companhia vs. Banco do Estado |
Check out your portfolio center.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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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