Correlation Between Paranapanema and Companhia
Can any of the company-specific risk be diversified away by investing in both Paranapanema and Companhia 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 Paranapanema and Companhia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Paranapanema SA and Companhia de Saneamento, you can compare the effects of market volatilities on Paranapanema and Companhia 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 Paranapanema with a short position of Companhia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Paranapanema and Companhia.
Diversification Opportunities for Paranapanema and Companhia
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Paranapanema and Companhia is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Paranapanema SA and Companhia de Saneamento in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Companhia de Saneamento and Paranapanema 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 Paranapanema SA are associated (or correlated) with Companhia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Companhia de Saneamento has no effect on the direction of Paranapanema i.e., Paranapanema and Companhia go up and down completely randomly.
Pair Corralation between Paranapanema and Companhia
Assuming the 90 days trading horizon Paranapanema SA is expected to under-perform the Companhia. In addition to that, Paranapanema is 2.12 times more volatile than Companhia de Saneamento. It trades about -0.2 of its total potential returns per unit of risk. Companhia de Saneamento is currently generating about 0.06 per unit of volatility. If you would invest 543.00 in Companhia de Saneamento on September 1, 2024 and sell it today you would earn a total of 63.00 from holding Companhia de Saneamento or generate 11.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Paranapanema SA vs. Companhia de Saneamento
Performance |
| Timeline |
| Paranapanema SA |
| Companhia de Saneamento |
Paranapanema and Companhia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Paranapanema and Companhia
The main advantage of trading using opposite Paranapanema and Companhia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Paranapanema position performs unexpectedly, Companhia 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 will offset losses from the drop in Companhia's long position.| Paranapanema vs. Marcopolo SA | Paranapanema vs. Cia de Ferro | Paranapanema vs. Valid Solues SA | Paranapanema vs. Unipar Carbocloro SA |
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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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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