Correlation Between Light SA and CPFL Energia
Can any of the company-specific risk be diversified away by investing in both Light 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 Light 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 Light SA and CPFL Energia SA, you can compare the effects of market volatilities on Light 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 Light SA with a short position of CPFL Energia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Light SA and CPFL Energia.
Diversification Opportunities for Light SA and CPFL Energia
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Light and CPFL is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Light 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 Light 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 Light 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 Light SA i.e., Light SA and CPFL Energia go up and down completely randomly.
Pair Corralation between Light SA and CPFL Energia
Assuming the 90 days trading horizon Light SA is expected to generate 4.36 times less return on investment than CPFL Energia. In addition to that, Light SA is 2.21 times more volatile than CPFL Energia SA. It trades about 0.02 of its total potential returns per unit of risk. CPFL Energia SA is currently generating about 0.2 per unit of volatility. If you would invest 3,382 in CPFL Energia SA on November 28, 2024 and sell it today you would earn a total of 160.00 from holding CPFL Energia SA or generate 4.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Light SA vs. CPFL Energia SA
Performance |
| Timeline |
| Light SA |
| CPFL Energia SA |
Light SA and CPFL Energia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Light SA and CPFL Energia
The main advantage of trading using opposite Light SA and CPFL Energia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Light 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.| Light SA vs. CPFL Energia SA | Light SA vs. Companhia Energtica de | Light SA vs. Centrais Eltricas Brasileiras | Light SA vs. Companhia de Saneamento |
| CPFL Energia vs. Multilaser Industrial SA | CPFL Energia vs. Metalrgica Riosulense SA | CPFL Energia vs. MAHLE Metal Leve | CPFL Energia vs. Patria Investments Limited |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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