Correlation Between Companhia Paranaense and Iberdrola
Can any of the company-specific risk be diversified away by investing in both Companhia Paranaense and Iberdrola 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 Iberdrola 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 Iberdrola SA, you can compare the effects of market volatilities on Companhia Paranaense and Iberdrola 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 Iberdrola. Check out your portfolio center. Please also check ongoing floating volatility patterns of Companhia Paranaense and Iberdrola.
Diversification Opportunities for Companhia Paranaense and Iberdrola
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Companhia and Iberdrola is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Companhia Paranaense de and Iberdrola SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iberdrola SA 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 Iberdrola. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iberdrola SA has no effect on the direction of Companhia Paranaense i.e., Companhia Paranaense and Iberdrola go up and down completely randomly.
Pair Corralation between Companhia Paranaense and Iberdrola
Considering the 90-day investment horizon Companhia Paranaense de is expected to generate 1.72 times more return on investment than Iberdrola. However, Companhia Paranaense is 1.72 times more volatile than Iberdrola SA. It trades about -0.06 of its potential returns per unit of risk. Iberdrola SA is currently generating about -0.11 per unit of risk. If you would invest 671.00 in Companhia Paranaense de on September 1, 2024 and sell it today you would lose (24.00) from holding Companhia Paranaense de or give up 3.58% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Companhia Paranaense de vs. Iberdrola SA
Performance |
| Timeline |
| Companhia Paranaense |
| Iberdrola SA |
Companhia Paranaense and Iberdrola Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Companhia Paranaense and Iberdrola
The main advantage of trading using opposite Companhia Paranaense and Iberdrola positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Companhia Paranaense position performs unexpectedly, Iberdrola 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 Iberdrola will offset losses from the drop in Iberdrola's long position.| Companhia Paranaense vs. The AES | Companhia Paranaense vs. Avista | Companhia Paranaense vs. Brookfield Infrastructure Partners | Companhia Paranaense vs. Companhia Energetica de |
| Iberdrola vs. Companhia Paranaense de | Iberdrola vs. Otter Tail | Iberdrola vs. Brookfield Infrastructure Partners | Iberdrola vs. RWE AG PK |
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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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