Correlation Between Companhia Paranaense and Equatorial Energia
Can any of the company-specific risk be diversified away by investing in both Companhia Paranaense and Equatorial 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 Companhia Paranaense and Equatorial Energia 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 Equatorial Energia SA, you can compare the effects of market volatilities on Companhia Paranaense and Equatorial 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 Companhia Paranaense with a short position of Equatorial Energia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Companhia Paranaense and Equatorial Energia.
Diversification Opportunities for Companhia Paranaense and Equatorial Energia
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Companhia and Equatorial is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Companhia Paranaense de and Equatorial Energia SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equatorial Energia 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 Equatorial Energia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equatorial Energia has no effect on the direction of Companhia Paranaense i.e., Companhia Paranaense and Equatorial Energia go up and down completely randomly.
Pair Corralation between Companhia Paranaense and Equatorial Energia
Assuming the 90 days trading horizon Companhia Paranaense de is expected to generate 0.99 times more return on investment than Equatorial Energia. However, Companhia Paranaense de is 1.01 times less risky than Equatorial Energia. It trades about 0.05 of its potential returns per unit of risk. Equatorial Energia SA is currently generating about 0.03 per unit of risk. If you would invest 644.00 in Companhia Paranaense de on September 2, 2024 and sell it today you would earn a total of 229.00 from holding Companhia Paranaense de or generate 35.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Companhia Paranaense de vs. Equatorial Energia SA
Performance |
| Timeline |
| Companhia Paranaense |
| Equatorial Energia |
Companhia Paranaense and Equatorial Energia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Companhia Paranaense and Equatorial Energia
The main advantage of trading using opposite Companhia Paranaense and Equatorial Energia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Companhia Paranaense position performs unexpectedly, Equatorial 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 Equatorial Energia will offset losses from the drop in Equatorial Energia's long position.| Companhia Paranaense vs. Companhia Paranaense de | Companhia Paranaense vs. CTEEP Companhia | Companhia Paranaense vs. CPFL Energia SA |
| Equatorial Energia vs. Localiza Rent a | Equatorial Energia vs. Raia Drogasil SA | Equatorial Energia vs. Engie Brasil Energia | Equatorial Energia vs. Lojas Renner 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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