Correlation Between Otter Tail and Companhia Paranaense
Can any of the company-specific risk be diversified away by investing in both Otter Tail 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 Otter Tail and Companhia Paranaense into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Otter Tail and Companhia Paranaense de, you can compare the effects of market volatilities on Otter Tail 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 Otter Tail with a short position of Companhia Paranaense. Check out your portfolio center. Please also check ongoing floating volatility patterns of Otter Tail and Companhia Paranaense.
Diversification Opportunities for Otter Tail and Companhia Paranaense
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Otter and Companhia is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Otter Tail and Companhia Paranaense de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Companhia Paranaense and Otter Tail 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 Otter Tail 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 Otter Tail i.e., Otter Tail and Companhia Paranaense go up and down completely randomly.
Pair Corralation between Otter Tail and Companhia Paranaense
Given the investment horizon of 90 days Otter Tail is expected to generate 1.24 times more return on investment than Companhia Paranaense. However, Otter Tail is 1.24 times more volatile than Companhia Paranaense de. It trades about 0.08 of its potential returns per unit of risk. Companhia Paranaense de is currently generating about -0.07 per unit of risk. If you would invest 7,928 in Otter Tail on August 28, 2024 and sell it today you would earn a total of 266.00 from holding Otter Tail or generate 3.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Otter Tail vs. Companhia Paranaense de
Performance |
| Timeline |
| Otter Tail |
| Companhia Paranaense |
Otter Tail and Companhia Paranaense Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Otter Tail and Companhia Paranaense
The main advantage of trading using opposite Otter Tail and Companhia Paranaense positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Otter Tail 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.| Otter Tail vs. NorthWestern | Otter Tail vs. Avista | Otter Tail vs. Black Hills | Otter Tail vs. Companhia Paranaense de |
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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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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