Correlation Between CTEEP Companhia and Rio Paranapanema
Can any of the company-specific risk be diversified away by investing in both CTEEP Companhia and Rio Paranapanema 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 CTEEP Companhia and Rio Paranapanema into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CTEEP Companhia and Rio Paranapanema Energia, you can compare the effects of market volatilities on CTEEP Companhia and Rio Paranapanema 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 CTEEP Companhia with a short position of Rio Paranapanema. Check out your portfolio center. Please also check ongoing floating volatility patterns of CTEEP Companhia and Rio Paranapanema.
Diversification Opportunities for CTEEP Companhia and Rio Paranapanema
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between CTEEP and Rio is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding CTEEP Companhia and Rio Paranapanema Energia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rio Paranapanema Energia and CTEEP 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 CTEEP Companhia are associated (or correlated) with Rio Paranapanema. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rio Paranapanema Energia has no effect on the direction of CTEEP Companhia i.e., CTEEP Companhia and Rio Paranapanema go up and down completely randomly.
Pair Corralation between CTEEP Companhia and Rio Paranapanema
Assuming the 90 days trading horizon CTEEP Companhia is expected to generate 11.19 times less return on investment than Rio Paranapanema. But when comparing it to its historical volatility, CTEEP Companhia is 4.51 times less risky than Rio Paranapanema. It trades about 0.03 of its potential returns per unit of risk. Rio Paranapanema Energia is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 1,907 in Rio Paranapanema Energia on September 4, 2024 and sell it today you would earn a total of 1,243 from holding Rio Paranapanema Energia or generate 65.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 60.05% |
| Values | Daily Returns |
CTEEP Companhia vs. Rio Paranapanema Energia
Performance |
| Timeline |
| CTEEP Companhia |
| Rio Paranapanema Energia |
CTEEP Companhia and Rio Paranapanema Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CTEEP Companhia and Rio Paranapanema
The main advantage of trading using opposite CTEEP Companhia and Rio Paranapanema positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CTEEP Companhia position performs unexpectedly, Rio Paranapanema 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 Rio Paranapanema will offset losses from the drop in Rio Paranapanema's long position.| CTEEP Companhia vs. Transmissora Aliana de | CTEEP Companhia vs. Companhia Paranaense de | CTEEP Companhia vs. BB Seguridade Participacoes | CTEEP Companhia vs. Engie Brasil Energia |
| Rio Paranapanema vs. Transmissora Aliana de | Rio Paranapanema vs. CTEEP Companhia | Rio Paranapanema vs. Companhia Paranaense de | Rio Paranapanema 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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