Correlation Between BB Seguridade and CPFL Energia
Can any of the company-specific risk be diversified away by investing in both BB Seguridade and CPFL Energia 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 BB Seguridade and CPFL Energia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BB Seguridade Participacoes and CPFL Energia SA, you can compare the effects of market volatilities on BB Seguridade and CPFL Energia 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 BB Seguridade with a short position of CPFL Energia. Check out your portfolio center. Please also check ongoing floating volatility patterns of BB Seguridade and CPFL Energia.
Diversification Opportunities for BB Seguridade and CPFL Energia
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between BBSE3 and CPFL is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding BB Seguridade Participacoes and CPFL Energia SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CPFL Energia SA and BB Seguridade 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 BB Seguridade Participacoes are associated (or correlated) with CPFL Energia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CPFL Energia SA has no effect on the direction of BB Seguridade i.e., BB Seguridade and CPFL Energia go up and down completely randomly.
Pair Corralation between BB Seguridade and CPFL Energia
Assuming the 90 days trading horizon BB Seguridade Participacoes is expected to generate 0.91 times more return on investment than CPFL Energia. However, BB Seguridade Participacoes is 1.1 times less risky than CPFL Energia. It trades about 0.07 of its potential returns per unit of risk. CPFL Energia SA is currently generating about -0.02 per unit of risk. If you would invest 3,098 in BB Seguridade Participacoes on August 30, 2024 and sell it today you would earn a total of 245.00 from holding BB Seguridade Participacoes or generate 7.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
BB Seguridade Participacoes vs. CPFL Energia SA
Performance |
| Timeline |
| BB Seguridade Partic |
| CPFL Energia SA |
BB Seguridade and CPFL Energia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BB Seguridade and CPFL Energia
The main advantage of trading using opposite BB Seguridade and CPFL Energia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BB Seguridade position performs unexpectedly, CPFL Energia 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 CPFL Energia will offset losses from the drop in CPFL Energia's long position.| BB Seguridade vs. Cogna Educao SA | BB Seguridade vs. CVC Brasil Operadora | BB Seguridade vs. Oi SA | BB Seguridade vs. Azul SA |
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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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