Correlation Between Companhia and American States
Can any of the company-specific risk be diversified away by investing in both Companhia and American States 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 American States 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 American States Water, you can compare the effects of market volatilities on Companhia and American States 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 American States. Check out your portfolio center. Please also check ongoing floating volatility patterns of Companhia and American States.
Diversification Opportunities for Companhia and American States
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Companhia and American is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Companhia de Saneamento and American States Water in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American States Water 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 American States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American States Water has no effect on the direction of Companhia i.e., Companhia and American States go up and down completely randomly.
Pair Corralation between Companhia and American States
Considering the 90-day investment horizon Companhia is expected to generate 1.08 times less return on investment than American States. In addition to that, Companhia is 1.51 times more volatile than American States Water. It trades about 0.07 of its total potential returns per unit of risk. American States Water is currently generating about 0.11 per unit of volatility. If you would invest 7,115 in American States Water on August 24, 2024 and sell it today you would earn a total of 1,290 from holding American States Water or generate 18.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Companhia de Saneamento vs. American States Water
Performance |
| Timeline |
| Companhia de Saneamento |
| American States Water |
Companhia and American States Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Companhia and American States
The main advantage of trading using opposite Companhia and American States positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Companhia position performs unexpectedly, American States 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 American States will offset losses from the drop in American States' long position.| Companhia vs. Companhia Paranaense de | Companhia vs. Companhia Energetica de | Companhia vs. Ultrapar Participacoes SA | Companhia vs. Telefonica Brasil SA |
| American States vs. Middlesex Water | American States vs. SJW Group Common | American States vs. The York Water | American States vs. Artesian Resources |
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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