Correlation Between Companhia Energtica and Companhia

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

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

Diversification Opportunities for Companhia Energtica and Companhia

0.76

Correlation Coefficient

Companhia Energtica  Companhia

Poor diversification

The 3 months correlation between Companhia and Companhia is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Companhia Energtica de and Companhia de Saneamento in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Companhia de Saneamento and Companhia Energtica 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 Energtica de are associated (or correlated) with Companhia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Companhia de Saneamento has no effect on the direction of Companhia Energtica i.e., Companhia Energtica and Companhia go up and down completely randomly.

Pair Corralation between Companhia Energtica and Companhia

Assuming the 90 days trading horizon Companhia Energtica de is expected to generate 1.1 times more return on investment than Companhia. However, Companhia Energtica is 1.1 times more volatile than Companhia de Saneamento. It trades about 0.05 of its potential returns per unit of risk. Companhia de Saneamento is currently generating about -0.01 per unit of risk. If you would invest  1,145  in Companhia Energtica de on September 3, 2024 and sell it today you would earn a total of  45.00  from holding Companhia Energtica de or generate 3.93% return on investment over 90 days.

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

Companhia Energtica de  vs.  Companhia de Saneamento

Companhia Energtica

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Companhia Energtica de are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Companhia Energtica is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Companhia de Saneamento

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Companhia Energtica and Companhia

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

The idea behind Companhia Energtica de and Companhia de Saneamento 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.