Correlation Between Rio Paranapanema and CTEEP Companhia
Can any of the company-specific risk be diversified away by investing in both Rio Paranapanema and CTEEP 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 CTEEP 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 CTEEP Companhia, you can compare the effects of market volatilities on Rio Paranapanema and CTEEP 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 CTEEP Companhia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Rio Paranapanema and CTEEP Companhia.
Diversification Opportunities for Rio Paranapanema and CTEEP Companhia
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Rio and CTEEP is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Rio Paranapanema Energia and CTEEP Companhia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CTEEP Companhia 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 CTEEP Companhia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CTEEP Companhia has no effect on the direction of Rio Paranapanema i.e., Rio Paranapanema and CTEEP Companhia go up and down completely randomly.
Pair Corralation between Rio Paranapanema and CTEEP Companhia
Assuming the 90 days trading horizon Rio Paranapanema Energia is expected to generate 2.44 times more return on investment than CTEEP Companhia. However, Rio Paranapanema is 2.44 times more volatile than CTEEP Companhia. It trades about 0.14 of its potential returns per unit of risk. CTEEP Companhia is currently generating about -0.06 per unit of risk. If you would invest 2,532 in Rio Paranapanema Energia on August 31, 2024 and sell it today you would earn a total of 568.00 from holding Rio Paranapanema Energia or generate 22.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Rio Paranapanema Energia vs. CTEEP Companhia
Performance |
| Timeline |
| Rio Paranapanema Energia |
| CTEEP Companhia |
Rio Paranapanema and CTEEP Companhia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Rio Paranapanema and CTEEP Companhia
The main advantage of trading using opposite Rio Paranapanema and CTEEP Companhia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rio Paranapanema position performs unexpectedly, CTEEP 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 CTEEP Companhia will offset losses from the drop in CTEEP Companhia's long position.| Rio Paranapanema vs. Companhia Energtica do | Rio Paranapanema vs. Rio Paranapanema Energia | Rio Paranapanema vs. Grazziotin SA | Rio Paranapanema vs. Empresa Metropolitana de |
| CTEEP Companhia vs. Transmissora Aliana de | CTEEP Companhia vs. Companhia Paranaense de | CTEEP Companhia vs. BB Seguridade Participacoes | CTEEP Companhia vs. Engie Brasil Energia |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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