Correlation Between Alupar Investimento and Companhia Energtica

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

By analyzing existing cross correlation between Alupar Investimento SA and Companhia Energtica do, you can compare the effects of market volatilities on Alupar Investimento and Companhia Energtica 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 Alupar Investimento with a short position of Companhia Energtica. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alupar Investimento and Companhia Energtica.

Diversification Opportunities for Alupar Investimento and Companhia Energtica

0.93

Correlation Coefficient

Alupar Investimento  Companhia Energtica

Almost no diversification

The 3 months correlation between Alupar and Companhia is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Alupar Investimento SA and Companhia Energtica do in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Companhia Energtica and Alupar Investimento 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 Alupar Investimento SA are associated (or correlated) with Companhia Energtica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Companhia Energtica has no effect on the direction of Alupar Investimento i.e., Alupar Investimento and Companhia Energtica go up and down completely randomly.

Pair Corralation between Alupar Investimento and Companhia Energtica

Assuming the 90 days trading horizon Alupar Investimento SA is expected to generate 0.63 times more return on investment than Companhia Energtica. However, Alupar Investimento SA is 1.58 times less risky than Companhia Energtica. It trades about -0.17 of its potential returns per unit of risk. Companhia Energtica do is currently generating about -0.15 per unit of risk. If you would invest  3,109  in Alupar Investimento SA on September 13, 2024 and sell it today you would lose (375.00) from holding Alupar Investimento SA or give up 12.06% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Alupar Investimento SA  vs.  Companhia Energtica do

Alupar Investimento

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alupar Investimento SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Companhia Energtica

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Companhia Energtica do has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Preferred Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Alupar Investimento and Companhia Energtica

The main advantage of trading using opposite Alupar Investimento and Companhia Energtica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alupar Investimento position performs unexpectedly, Companhia Energtica 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 Energtica will offset losses from the drop in Companhia Energtica's long position.

The idea behind Alupar Investimento SA and Companhia Energtica do 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.