Correlation Between Cadiz Depositary and Companhia Paranaense

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

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

Diversification Opportunities for Cadiz Depositary and Companhia Paranaense

-0.88

Correlation Coefficient

Cadiz Depositary  Companhia Paranaense

Pay attention - limited upside

The 3 months correlation between Cadiz and Companhia is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding Cadiz Depositary Shares and Companhia Paranaense de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Companhia Paranaense and Cadiz Depositary 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 Cadiz Depositary Shares 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 Cadiz Depositary i.e., Cadiz Depositary and Companhia Paranaense go up and down completely randomly.

Pair Corralation between Cadiz Depositary and Companhia Paranaense

Assuming the 90 days horizon Cadiz Depositary Shares is expected to generate 0.32 times more return on investment than Companhia Paranaense. However, Cadiz Depositary Shares is 3.11 times less risky than Companhia Paranaense. It trades about 0.18 of its potential returns per unit of risk. Companhia Paranaense de is currently generating about -0.14 per unit of risk. If you would invest  1,636  in Cadiz Depositary Shares on September 25, 2024 and sell it today you would earn a total of  62.00  from holding Cadiz Depositary Shares or generate 3.79% return on investment over 90 days.

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

Cadiz Depositary Shares  vs.  Companhia Paranaense de

Cadiz Depositary Shares

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cadiz Depositary Shares are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak forward indicators, Cadiz Depositary reported solid returns over the last few months and may actually be approaching a breakup point.

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 conflicting performance in the last few months, the Stock's essential indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Cadiz Depositary and Companhia Paranaense

The main advantage of trading using opposite Cadiz Depositary and Companhia Paranaense positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cadiz Depositary 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 Cadiz Depositary Shares 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 Global Correlations module to find global opportunities by holding instruments from different markets.