Correlation Between Companhia and Empresa Metropolitana

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

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

Diversification Opportunities for Companhia and Empresa Metropolitana

-0.04

Correlation Coefficient

Companhia  Empresa Metropolitana

Good diversification

The 3 months correlation between Companhia and Empresa is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Companhia de Gs and Empresa Metropolitana de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Empresa Metropolitana and 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 Companhia de Gs are associated (or correlated) with Empresa Metropolitana. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Empresa Metropolitana has no effect on the direction of Companhia i.e., Companhia and Empresa Metropolitana go up and down completely randomly.

Pair Corralation between Companhia and Empresa Metropolitana

Assuming the 90 days trading horizon Companhia is expected to generate 1.01 times less return on investment than Empresa Metropolitana. In addition to that, Companhia is 1.96 times more volatile than Empresa Metropolitana de. It trades about 0.02 of its total potential returns per unit of risk. Empresa Metropolitana de is currently generating about 0.05 per unit of volatility. If you would invest  3,997  in Empresa Metropolitana de on December 2, 2024 and sell it today you would earn a total of  242.00  from holding Empresa Metropolitana de or generate 6.05% return on investment over 90 days.

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

Companhia de Gs  vs.  Empresa Metropolitana de

Companhia de Gs

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Companhia de Gs are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Companhia may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Empresa Metropolitana

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Empresa Metropolitana de are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Empresa Metropolitana may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Companhia and Empresa Metropolitana

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

The idea behind Companhia de Gs and Empresa Metropolitana 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.