Correlation Between AES and Companhia Paranaense

Can any of the company-specific risk be diversified away by investing in both AES 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 AES and Companhia Paranaense into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between The AES and Companhia Paranaense de, you can compare the effects of market volatilities on AES 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 AES with a short position of Companhia Paranaense. Check out your portfolio center. Please also check ongoing floating volatility patterns of AES and Companhia Paranaense.

Diversification Opportunities for AES and Companhia Paranaense

0.73

Correlation Coefficient

AES  Companhia Paranaense

Poor diversification

The 3 months correlation between AES and Companhia is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding The AES and Companhia Paranaense de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Companhia Paranaense and AES 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 The AES 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 AES i.e., AES and Companhia Paranaense go up and down completely randomly.

Pair Corralation between AES and Companhia Paranaense

Considering the 90-day investment horizon The AES is expected to under-perform the Companhia Paranaense. In addition to that, AES is 1.36 times more volatile than Companhia Paranaense de. It trades about -0.16 of its total potential returns per unit of risk. Companhia Paranaense de is currently generating about -0.07 per unit of volatility. If you would invest  738.00  in Companhia Paranaense de on August 30, 2024 and sell it today you would lose (74.00) from holding Companhia Paranaense de or give up 10.03% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

The AES  vs.  Companhia Paranaense de

AES

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The AES has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in December 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Companhia Paranaense

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Companhia Paranaense de has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest conflicting performance, the Stock's essential indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with AES and Companhia Paranaense

The main advantage of trading using opposite AES and Companhia Paranaense positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AES 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.

The idea behind The AES and Companhia Paranaense de pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.