Correlation Between Companhia and Rio Paranapanema
Can any of the company-specific risk be diversified away by investing in both Companhia and Rio Paranapanema 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 and Rio Paranapanema into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Companhia de Gs and Rio Paranapanema Energia, you can compare the effects of market volatilities on Companhia and Rio Paranapanema 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 with a short position of Rio Paranapanema. Check out your portfolio center. Please also check ongoing floating volatility patterns of Companhia and Rio Paranapanema.
Diversification Opportunities for Companhia and Rio Paranapanema
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Companhia and Rio is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Companhia de Gs and Rio Paranapanema Energia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rio Paranapanema Energia and Companhia 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 de Gs are associated (or correlated) with Rio Paranapanema. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rio Paranapanema Energia has no effect on the direction of Companhia i.e., Companhia and Rio Paranapanema go up and down completely randomly.
Pair Corralation between Companhia and Rio Paranapanema
Assuming the 90 days trading horizon Companhia de Gs is expected to under-perform the Rio Paranapanema. But the stock apears to be less risky and, when comparing its historical volatility, Companhia de Gs is 1.7 times less risky than Rio Paranapanema. The stock trades about -0.07 of its potential returns per unit of risk. The Rio Paranapanema Energia is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 2,900 in Rio Paranapanema Energia on August 28, 2024 and sell it today you would earn a total of 161.00 from holding Rio Paranapanema Energia or generate 5.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Companhia de Gs vs. Rio Paranapanema Energia
Performance |
| Timeline |
| Companhia de Gs |
| Rio Paranapanema Energia |
Companhia and Rio Paranapanema Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Companhia and Rio Paranapanema
The main advantage of trading using opposite Companhia and Rio Paranapanema positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Companhia position performs unexpectedly, Rio Paranapanema 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 Rio Paranapanema will offset losses from the drop in Rio Paranapanema's long position.| Companhia vs. Companhia de Gs | Companhia vs. Braskem SA | Companhia vs. Companhia Paranaense de | Companhia vs. Companhia Energtica de |
| Rio Paranapanema vs. Rio Paranapanema Energia | Rio Paranapanema vs. CTEEP Companhia | Rio Paranapanema vs. Empresa Metropolitana de | Rio Paranapanema vs. Energisa 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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