Correlation Between Companhia and Itasa Investimentos
Can any of the company-specific risk be diversified away by investing in both Companhia and Itasa Investimentos 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 Companhia and Itasa Investimentos into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Companhia de Saneamento and Itasa Investimentos, you can compare the effects of market volatilities on Companhia and Itasa Investimentos 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 Companhia with a short position of Itasa Investimentos. Check out your portfolio center. Please also check ongoing floating volatility patterns of Companhia and Itasa Investimentos.
Diversification Opportunities for Companhia and Itasa Investimentos
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Companhia and Itasa is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Companhia de Saneamento and Itasa Investimentos in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Itasa Investimentos and Companhia 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 Companhia de Saneamento are associated (or correlated) with Itasa Investimentos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Itasa Investimentos has no effect on the direction of Companhia i.e., Companhia and Itasa Investimentos go up and down completely randomly.
Pair Corralation between Companhia and Itasa Investimentos
Assuming the 90 days trading horizon Companhia de Saneamento is expected to generate 1.32 times more return on investment than Itasa Investimentos. However, Companhia is 1.32 times more volatile than Itasa Investimentos. It trades about 0.08 of its potential returns per unit of risk. Itasa Investimentos is currently generating about 0.05 per unit of risk. If you would invest 2,069 in Companhia de Saneamento on September 2, 2024 and sell it today you would earn a total of 956.00 from holding Companhia de Saneamento or generate 46.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.47% |
| Values | Daily Returns |
Companhia de Saneamento vs. Itasa Investimentos
Performance |
| Timeline |
| Companhia de Saneamento |
| Itasa Investimentos |
Companhia and Itasa Investimentos Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Companhia and Itasa Investimentos
The main advantage of trading using opposite Companhia and Itasa Investimentos positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Companhia position performs unexpectedly, Itasa Investimentos 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 Itasa Investimentos will offset losses from the drop in Itasa Investimentos' long position.| Companhia vs. BB Seguridade Participacoes | Companhia vs. Transmissora Aliana de | Companhia vs. Alupar Investimento SA | Companhia vs. Banco do Estado |
| Itasa Investimentos vs. Banco do Brasil | Itasa Investimentos vs. Banco Bradesco SA | Itasa Investimentos vs. Ita Unibanco Holding | Itasa Investimentos vs. Petrleo Brasileiro SA |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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