Correlation Between Rio Paranapanema and Companhia
Can any of the company-specific risk be diversified away by investing in both Rio Paranapanema and Companhia 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 Rio Paranapanema and Companhia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Rio Paranapanema Energia and Companhia de Gs, you can compare the effects of market volatilities on Rio Paranapanema and Companhia 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 Rio Paranapanema with a short position of Companhia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rio Paranapanema and Companhia.
Diversification Opportunities for Rio Paranapanema and Companhia
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Rio and Companhia is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Rio Paranapanema Energia and Companhia de Gs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Companhia de Gs and Rio Paranapanema 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 Rio Paranapanema Energia are associated (or correlated) with Companhia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Companhia de Gs has no effect on the direction of Rio Paranapanema i.e., Rio Paranapanema and Companhia go up and down completely randomly.
Pair Corralation between Rio Paranapanema and Companhia
Assuming the 90 days trading horizon Rio Paranapanema Energia is expected to generate 1.7 times more return on investment than Companhia. However, Rio Paranapanema is 1.7 times more volatile than Companhia de Gs. It trades about 0.1 of its potential returns per unit of risk. Companhia de Gs is currently generating about -0.07 per unit of risk. If you would invest 2,900 in Rio Paranapanema Energia on August 28, 2024 and sell it today you would earn a total of 161.00 from holding Rio Paranapanema Energia or generate 5.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Rio Paranapanema Energia vs. Companhia de Gs
Performance |
| Timeline |
| Rio Paranapanema Energia |
| Companhia de Gs |
Rio Paranapanema and Companhia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rio Paranapanema and Companhia
The main advantage of trading using opposite Rio Paranapanema and Companhia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rio Paranapanema position performs unexpectedly, Companhia 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 will offset losses from the drop in Companhia's long position.| Rio Paranapanema vs. Rio Paranapanema Energia | Rio Paranapanema vs. CTEEP Companhia | Rio Paranapanema vs. Empresa Metropolitana de | Rio Paranapanema vs. Energisa SA |
| Companhia vs. Companhia de Gs | Companhia vs. Braskem SA | Companhia vs. Companhia Paranaense de | Companhia vs. Companhia Energtica de |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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