Correlation Between Companhia Energtica and Empresa Metropolitana
Can any of the company-specific risk be diversified away by investing in both Companhia Energtica and Empresa Metropolitana 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 Companhia Energtica and Empresa Metropolitana into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Companhia Energtica de and Empresa Metropolitana de, you can compare the effects of market volatilities on Companhia Energtica and Empresa Metropolitana 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 Companhia Energtica with a short position of Empresa Metropolitana. Check out your portfolio center. Please also check ongoing floating volatility patterns of Companhia Energtica and Empresa Metropolitana.
Diversification Opportunities for Companhia Energtica and Empresa Metropolitana
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between Companhia and Empresa is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Companhia Energtica de and Empresa Metropolitana de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Empresa Metropolitana and Companhia Energtica 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 Companhia Energtica de are associated (or correlated) with Empresa Metropolitana. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Empresa Metropolitana has no effect on the direction of Companhia Energtica i.e., Companhia Energtica and Empresa Metropolitana go up and down completely randomly.
Pair Corralation between Companhia Energtica and Empresa Metropolitana
Assuming the 90 days trading horizon Companhia Energtica de is expected to under-perform the Empresa Metropolitana. In addition to that, Companhia Energtica is 1.75 times more volatile than Empresa Metropolitana de. It trades about -0.23 of its total potential returns per unit of risk. Empresa Metropolitana de is currently generating about 0.02 per unit of volatility. If you would invest 3,978 in Empresa Metropolitana de on September 1, 2024 and sell it today you would earn a total of 21.00 from holding Empresa Metropolitana de or generate 0.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Companhia Energtica de vs. Empresa Metropolitana de
Performance |
| Timeline |
| Companhia Energtica |
| Empresa Metropolitana |
Companhia Energtica and Empresa Metropolitana Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Companhia Energtica and Empresa Metropolitana
The main advantage of trading using opposite Companhia Energtica and Empresa Metropolitana positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Companhia Energtica position performs unexpectedly, Empresa Metropolitana 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 Empresa Metropolitana will offset losses from the drop in Empresa Metropolitana's long position.| Companhia Energtica vs. Companhia Energtica de | Companhia Energtica vs. Companhia Energtica de | Companhia Energtica vs. Companhiade Eletricidade do | Companhia Energtica vs. Empresa Metropolitana de |
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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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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