Correlation Between Companhia Paranaense and Companhia Energetica
Can any of the company-specific risk be diversified away by investing in both Companhia Paranaense and Companhia Energetica 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 Companhia Energetica 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 Companhia Energetica de, you can compare the effects of market volatilities on Companhia Paranaense and Companhia Energetica 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 Companhia Energetica. Check out your portfolio center. Please also check ongoing floating volatility patterns of Companhia Paranaense and Companhia Energetica.
Diversification Opportunities for Companhia Paranaense and Companhia Energetica
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Companhia and Companhia is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Companhia Paranaense de and Companhia Energetica de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Companhia Energetica 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 Companhia Energetica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Companhia Energetica has no effect on the direction of Companhia Paranaense i.e., Companhia Paranaense and Companhia Energetica go up and down completely randomly.
Pair Corralation between Companhia Paranaense and Companhia Energetica
Considering the 90-day investment horizon Companhia Paranaense de is expected to under-perform the Companhia Energetica. But the stock apears to be less risky and, when comparing its historical volatility, Companhia Paranaense de is 1.42 times less risky than Companhia Energetica. The stock trades about -0.16 of its potential returns per unit of risk. The Companhia Energetica de is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 194.00 in Companhia Energetica de on August 27, 2024 and sell it today you would earn a total of 5.00 from holding Companhia Energetica de or generate 2.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Companhia Paranaense de vs. Companhia Energetica de
Performance |
| Timeline |
| Companhia Paranaense |
| Companhia Energetica |
Companhia Paranaense and Companhia Energetica Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Companhia Paranaense and Companhia Energetica
The main advantage of trading using opposite Companhia Paranaense and Companhia Energetica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Companhia Paranaense position performs unexpectedly, Companhia Energetica 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 Companhia Energetica will offset losses from the drop in Companhia Energetica's long position.| Companhia Paranaense vs. Montauk Renewables | Companhia Paranaense vs. Energy of Minas | Companhia Paranaense vs. NorthWestern | Companhia Paranaense vs. Otter Tail |
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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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