Correlation Between CPFL Energia and Direcional Engenharia
Can any of the company-specific risk be diversified away by investing in both CPFL Energia and Direcional Engenharia 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 CPFL Energia and Direcional Engenharia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CPFL Energia SA and Direcional Engenharia SA, you can compare the effects of market volatilities on CPFL Energia and Direcional Engenharia 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 CPFL Energia with a short position of Direcional Engenharia. Check out your portfolio center. Please also check ongoing floating volatility patterns of CPFL Energia and Direcional Engenharia.
Diversification Opportunities for CPFL Energia and Direcional Engenharia
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between CPFL and Direcional is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding CPFL Energia SA and Direcional Engenharia SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direcional Engenharia and CPFL Energia 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 CPFL Energia SA are associated (or correlated) with Direcional Engenharia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direcional Engenharia has no effect on the direction of CPFL Energia i.e., CPFL Energia and Direcional Engenharia go up and down completely randomly.
Pair Corralation between CPFL Energia and Direcional Engenharia
Assuming the 90 days trading horizon CPFL Energia SA is expected to under-perform the Direcional Engenharia. But the stock apears to be less risky and, when comparing its historical volatility, CPFL Energia SA is 1.95 times less risky than Direcional Engenharia. The stock trades about -0.02 of its potential returns per unit of risk. The Direcional Engenharia SA is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 2,318 in Direcional Engenharia SA on August 30, 2024 and sell it today you would earn a total of 478.00 from holding Direcional Engenharia SA or generate 20.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
CPFL Energia SA vs. Direcional Engenharia SA
Performance |
| Timeline |
| CPFL Energia SA |
| Direcional Engenharia |
CPFL Energia and Direcional Engenharia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CPFL Energia and Direcional Engenharia
The main advantage of trading using opposite CPFL Energia and Direcional Engenharia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CPFL Energia position performs unexpectedly, Direcional Engenharia 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 Direcional Engenharia will offset losses from the drop in Direcional Engenharia's long position.The idea behind CPFL Energia SA and Direcional Engenharia SA pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Direcional Engenharia vs. Even Construtora e | Direcional Engenharia vs. MRV Engenharia e | Direcional Engenharia vs. Cyrela Brazil Realty | Direcional Engenharia vs. Helbor Empreendimentos 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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