Correlation Between CPFL Energia and CCR SA

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

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

Diversification Opportunities for CPFL Energia and CCR SA

0.71

Correlation Coefficient

CPFL Energia  CCR SA

Poor diversification

The 3 months correlation between CPFL and CCR is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding CPFL Energia SA and CCR SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CCR SA and CPFL Energia 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 CPFL Energia SA are associated (or correlated) with CCR SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CCR SA has no effect on the direction of CPFL Energia i.e., CPFL Energia and CCR SA go up and down completely randomly.

Pair Corralation between CPFL Energia and CCR SA

Assuming the 90 days trading horizon CPFL Energia SA is expected to generate 0.52 times more return on investment than CCR SA. However, CPFL Energia SA is 1.92 times less risky than CCR SA. It trades about -0.06 of its potential returns per unit of risk. CCR SA is currently generating about -0.11 per unit of risk. If you would invest  3,381  in CPFL Energia SA on September 12, 2024 and sell it today you would lose (116.00) from holding CPFL Energia SA or give up 3.43% of portfolio value over 90 days.

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

CPFL Energia SA  vs.  CCR SA

CPFL Energia SA

Risk-Adjusted Performance

0 of 100

Very Weak

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

CCR SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CCR SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with CPFL Energia and CCR SA

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

The idea behind CPFL Energia SA and CCR SA 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.