Correlation Between Alupar Investimento and Companhia Paranaense

Can any of the company-specific risk be diversified away by investing in both Alupar Investimento 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 Alupar Investimento and Companhia Paranaense 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 Paranaense de, you can compare the effects of market volatilities on Alupar Investimento 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 Alupar Investimento with a short position of Companhia Paranaense. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alupar Investimento and Companhia Paranaense.

Diversification Opportunities for Alupar Investimento and Companhia Paranaense

0.74

Correlation Coefficient

Alupar Investimento  Companhia Paranaense

Poor diversification

The 3 months correlation between Alupar and Companhia is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Alupar Investimento SA and Companhia Paranaense de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Companhia Paranaense 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 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 Alupar Investimento i.e., Alupar Investimento and Companhia Paranaense go up and down completely randomly.

Pair Corralation between Alupar Investimento and Companhia Paranaense

Assuming the 90 days trading horizon Alupar Investimento SA is expected to under-perform the Companhia Paranaense. In addition to that, Alupar Investimento is 1.19 times more volatile than Companhia Paranaense de. It trades about -0.06 of its total potential returns per unit of risk. Companhia Paranaense de is currently generating about 0.09 per unit of volatility. If you would invest  872.00  in Companhia Paranaense de on December 4, 2024 and sell it today you would earn a total of  19.00  from holding Companhia Paranaense de or generate 2.18% return on investment over 90 days.

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

Alupar Investimento SA  vs.  Companhia Paranaense de

Alupar Investimento

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Alupar Investimento SA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Alupar Investimento is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Companhia Paranaense

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Companhia Paranaense de are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Companhia Paranaense may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Alupar Investimento and Companhia Paranaense

The main advantage of trading using opposite Alupar Investimento and Companhia Paranaense positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alupar Investimento 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 Alupar Investimento SA 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.