Correlation Between Companhia and Companhia Paranaense
Can any of the company-specific risk be diversified away by investing in both Companhia 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 Companhia and Companhia Paranaense 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 Companhia Paranaense de, you can compare the effects of market volatilities on Companhia 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 Companhia with a short position of Companhia Paranaense. Check out your portfolio center. Please also check ongoing floating volatility patterns of Companhia and Companhia Paranaense.
Diversification Opportunities for Companhia and Companhia Paranaense
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Companhia and Companhia is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Companhia de Saneamento and Companhia Paranaense de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Companhia Paranaense 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 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 Companhia i.e., Companhia and Companhia Paranaense go up and down completely randomly.
Pair Corralation between Companhia and Companhia Paranaense
Assuming the 90 days trading horizon Companhia de Saneamento is expected to under-perform the Companhia Paranaense. In addition to that, Companhia is 1.04 times more volatile than Companhia Paranaense de. It trades about -0.17 of its total potential returns per unit of risk. Companhia Paranaense de is currently generating about -0.15 per unit of volatility. If you would invest 870.00 in Companhia Paranaense de on August 26, 2024 and sell it today you would lose (34.00) from holding Companhia Paranaense de or give up 3.91% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Companhia de Saneamento vs. Companhia Paranaense de
Performance |
| Timeline |
| Companhia de Saneamento |
| Companhia Paranaense |
Companhia and Companhia Paranaense Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Companhia and Companhia Paranaense
The main advantage of trading using opposite Companhia and Companhia Paranaense positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Companhia 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.| Companhia vs. CTEEP Companhia | Companhia vs. BB Seguridade Participacoes | Companhia vs. Transmissora Aliana de | Companhia vs. Itasa Investimentos |
| Companhia Paranaense vs. Companhia Paranaense de | Companhia Paranaense vs. Companhia de Saneamento | Companhia Paranaense vs. CTEEP Companhia | Companhia Paranaense vs. Companhia Energtica de |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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