Correlation Between Itasa Investimentos and CPFL Energia
Can any of the company-specific risk be diversified away by investing in both Itasa Investimentos 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 Itasa Investimentos and CPFL Energia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Itasa Investimentos and CPFL Energia SA, you can compare the effects of market volatilities on Itasa Investimentos 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 Itasa Investimentos with a short position of CPFL Energia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Itasa Investimentos and CPFL Energia.
Diversification Opportunities for Itasa Investimentos and CPFL Energia
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Itasa and CPFL is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Itasa Investimentos 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 Itasa Investimentos 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 Itasa Investimentos 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 Itasa Investimentos i.e., Itasa Investimentos and CPFL Energia go up and down completely randomly.
Pair Corralation between Itasa Investimentos and CPFL Energia
Assuming the 90 days trading horizon Itasa Investimentos is expected to generate 1.06 times more return on investment than CPFL Energia. However, Itasa Investimentos is 1.06 times more volatile than CPFL Energia SA. It trades about 0.01 of its potential returns per unit of risk. CPFL Energia SA is currently generating about -0.02 per unit of risk. If you would invest 965.00 in Itasa Investimentos on August 30, 2024 and sell it today you would earn a total of 13.00 from holding Itasa Investimentos or generate 1.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Itasa Investimentos vs. CPFL Energia SA
Performance |
| Timeline |
| Itasa Investimentos |
| CPFL Energia SA |
Itasa Investimentos and CPFL Energia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Itasa Investimentos and CPFL Energia
The main advantage of trading using opposite Itasa Investimentos and CPFL Energia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Itasa Investimentos 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.| Itasa Investimentos vs. BB Seguridade Participacoes | Itasa Investimentos vs. Banco ABC Brasil | Itasa Investimentos vs. Companhia de Saneamento | Itasa Investimentos vs. CTEEP Companhia |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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