Correlation Between Centrais Eltricas and Companhia Paranaense

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Can any of the company-specific risk be diversified away by investing in both Centrais Eltricas 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 Centrais Eltricas and Companhia Paranaense into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Centrais Eltricas de and Companhia Paranaense de, you can compare the effects of market volatilities on Centrais Eltricas 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 Centrais Eltricas with a short position of Companhia Paranaense. Check out your portfolio center. Please also check ongoing floating volatility patterns of Centrais Eltricas and Companhia Paranaense.

Diversification Opportunities for Centrais Eltricas and Companhia Paranaense

CentraisCompanhiaDiversified AwayCentraisCompanhiaDiversified Away100%
-0.25
  Correlation Coefficient

Very good diversification

The 3 months correlation between Centrais and Companhia is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Centrais Eltricas de and Companhia Paranaense de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Companhia Paranaense and Centrais Eltricas 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 Centrais Eltricas de 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 Centrais Eltricas i.e., Centrais Eltricas and Companhia Paranaense go up and down completely randomly.

Pair Corralation between Centrais Eltricas and Companhia Paranaense

Assuming the 90 days trading horizon Centrais Eltricas de is expected to generate 0.46 times more return on investment than Companhia Paranaense. However, Centrais Eltricas de is 2.15 times less risky than Companhia Paranaense. It trades about 0.11 of its potential returns per unit of risk. Companhia Paranaense de is currently generating about -0.01 per unit of risk. If you would invest  7,367  in Centrais Eltricas de on November 14, 2024 and sell it today you would earn a total of  620.00  from holding Centrais Eltricas de or generate 8.42% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy86.44%
ValuesDaily Returns

Centrais Eltricas de  vs.  Companhia Paranaense de

 Performance 
JavaScript chart by amCharts 3.21.15NovDec2025 -20-15-10-505
JavaScript chart by amCharts 3.21.15CLSC3 CPLE5
       Timeline  
Centrais Eltricas 

Risk-Adjusted Performance

OK

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Centrais Eltricas de are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Centrais Eltricas may actually be approaching a critical reversion point that can send shares even higher in March 2025.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb71727374757677787980
Companhia Paranaense 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Companhia Paranaense de has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Companhia Paranaense is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.
JavaScript chart by amCharts 3.21.15NovDecJanFebDecJanFeb9.51010.51111.5

Centrais Eltricas and Companhia Paranaense Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-4.21-3.15-2.1-1.040.01.12.213.334.45 0.050.100.150.20
JavaScript chart by amCharts 3.21.15CLSC3 CPLE5
       Returns  

Pair Trading with Centrais Eltricas and Companhia Paranaense

The main advantage of trading using opposite Centrais Eltricas and Companhia Paranaense positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Centrais Eltricas 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 Centrais Eltricas de 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.
Check out your portfolio center.
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.

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