Correlation Between Companhia Paranaense and Duke Energy
Can any of the company-specific risk be diversified away by investing in both Companhia Paranaense and Duke Energy 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 Paranaense and Duke Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Companhia Paranaense de and Duke Energy, you can compare the effects of market volatilities on Companhia Paranaense and Duke Energy 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 Paranaense with a short position of Duke Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Companhia Paranaense and Duke Energy.
Diversification Opportunities for Companhia Paranaense and Duke Energy
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Companhia and Duke is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Companhia Paranaense de and Duke Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Duke Energy and Companhia Paranaense 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 Paranaense de are associated (or correlated) with Duke Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Duke Energy has no effect on the direction of Companhia Paranaense i.e., Companhia Paranaense and Duke Energy go up and down completely randomly.
Pair Corralation between Companhia Paranaense and Duke Energy
Assuming the 90 days trading horizon Companhia Paranaense is expected to generate 1.06 times less return on investment than Duke Energy. But when comparing it to its historical volatility, Companhia Paranaense de is 1.48 times less risky than Duke Energy. It trades about 0.05 of its potential returns per unit of risk. Duke Energy is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 54,680 in Duke Energy on September 5, 2024 and sell it today you would earn a total of 13,630 from holding Duke Energy or generate 24.93% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 82.6% |
Values | Daily Returns |
Companhia Paranaense de vs. Duke Energy
Performance |
Timeline |
Companhia Paranaense |
Duke Energy |
Companhia Paranaense and Duke Energy Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Companhia Paranaense and Duke Energy
The main advantage of trading using opposite Companhia Paranaense and Duke Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Companhia Paranaense position performs unexpectedly, Duke Energy 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 Duke Energy will offset losses from the drop in Duke Energy's long position.The idea behind Companhia Paranaense de and Duke Energy 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.
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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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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