Correlation Between Gafisa SA and CPFL Energia
Can any of the company-specific risk be diversified away by investing in both Gafisa SA and CPFL 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 Gafisa SA and CPFL Energia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gafisa SA and CPFL Energia SA, you can compare the effects of market volatilities on Gafisa SA and CPFL 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 Gafisa SA with a short position of CPFL Energia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gafisa SA and CPFL Energia.
Diversification Opportunities for Gafisa SA and CPFL Energia
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Gafisa and CPFL is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Gafisa SA and CPFL Energia SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CPFL Energia SA and Gafisa SA 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 Gafisa SA are associated (or correlated) with CPFL Energia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CPFL Energia SA has no effect on the direction of Gafisa SA i.e., Gafisa SA and CPFL Energia go up and down completely randomly.
Pair Corralation between Gafisa SA and CPFL Energia
Assuming the 90 days trading horizon Gafisa SA is expected to under-perform the CPFL Energia. In addition to that, Gafisa SA is 4.16 times more volatile than CPFL Energia SA. It trades about 0.0 of its total potential returns per unit of risk. CPFL Energia SA is currently generating about 0.03 per unit of volatility. If you would invest 2,689 in CPFL Energia SA on August 27, 2024 and sell it today you would earn a total of 609.00 from holding CPFL Energia SA or generate 22.65% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Gafisa SA vs. CPFL Energia SA
Performance |
Timeline |
Gafisa SA |
CPFL Energia SA |
Gafisa SA and CPFL Energia Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Gafisa SA and CPFL Energia
The main advantage of trading using opposite Gafisa SA and CPFL Energia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gafisa SA position performs unexpectedly, CPFL 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 CPFL Energia will offset losses from the drop in CPFL Energia's long position.Gafisa SA vs. Cyrela Brazil Realty | Gafisa SA vs. Rossi Residencial SA | Gafisa SA vs. MRV Engenharia e | Gafisa SA vs. PDG Realty SA |
CPFL Energia vs. BB Seguridade Participacoes | CPFL Energia vs. Engie Brasil Energia | CPFL Energia vs. CTEEP Companhia | CPFL Energia vs. Itasa Investimentos |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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