Correlation Between NorthWestern and Companhia Paranaense
Can any of the company-specific risk be diversified away by investing in both NorthWestern and Companhia Paranaense 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 NorthWestern and Companhia Paranaense into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NorthWestern and Companhia Paranaense de, you can compare the effects of market volatilities on NorthWestern and Companhia Paranaense 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 NorthWestern with a short position of Companhia Paranaense. Check out your portfolio center. Please also check ongoing floating volatility patterns of NorthWestern and Companhia Paranaense.
Diversification Opportunities for NorthWestern and Companhia Paranaense
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between NorthWestern and Companhia is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding NorthWestern and Companhia Paranaense de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Companhia Paranaense and NorthWestern 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 NorthWestern are associated (or correlated) with Companhia Paranaense. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Companhia Paranaense has no effect on the direction of NorthWestern i.e., NorthWestern and Companhia Paranaense go up and down completely randomly.
Pair Corralation between NorthWestern and Companhia Paranaense
Considering the 90-day investment horizon NorthWestern is expected to generate 0.62 times more return on investment than Companhia Paranaense. However, NorthWestern is 1.62 times less risky than Companhia Paranaense. It trades about 0.02 of its potential returns per unit of risk. Companhia Paranaense de is currently generating about -0.03 per unit of risk. If you would invest 5,272 in NorthWestern on November 2, 2024 and sell it today you would earn a total of 97.00 from holding NorthWestern or generate 1.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NorthWestern vs. Companhia Paranaense de
Performance |
| Timeline |
| NorthWestern |
| Companhia Paranaense |
NorthWestern and Companhia Paranaense Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NorthWestern and Companhia Paranaense
The main advantage of trading using opposite NorthWestern and Companhia Paranaense positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NorthWestern position performs unexpectedly, Companhia Paranaense 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 Paranaense will offset losses from the drop in Companhia Paranaense's long position.| NorthWestern vs. Allete Inc | NorthWestern vs. Black Hills | NorthWestern vs. Otter Tail | NorthWestern vs. Avista |
| Companhia Paranaense vs. Montauk Renewables | Companhia Paranaense vs. Energy of Minas | Companhia Paranaense vs. NorthWestern | Companhia Paranaense vs. Otter Tail |
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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