Correlation Between Companhia Paranaense and Companhia Paranaense

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

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

Diversification Opportunities for Companhia Paranaense and Companhia Paranaense

0.78

Correlation Coefficient

Companhia Paranaense  Companhia Paranaense

Poor diversification

The 3 months correlation between Companhia and Companhia is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Companhia Paranaense 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 Companhia Paranaense 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 Paranaense 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 Companhia Paranaense i.e., Companhia Paranaense and Companhia Paranaense go up and down completely randomly.

Pair Corralation between Companhia Paranaense and Companhia Paranaense

Assuming the 90 days trading horizon Companhia Paranaense de is expected to generate about the same return on investment as Companhia Paranaense de. But, Companhia Paranaense de is 1.04 times less risky than Companhia Paranaense. It trades about 0.07 of its potential returns per unit of risk. Companhia Paranaense de is currently generating about 0.07 per unit of risk. If you would invest  583.00  in Companhia Paranaense de on November 21, 2024 and sell it today you would earn a total of  334.00  from holding Companhia Paranaense de or generate 57.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Companhia Paranaense de  vs.  Companhia Paranaense de

Companhia Paranaense

Risk-Adjusted Performance

OK

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

Companhia Paranaense

Risk-Adjusted Performance

OK

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

Pair Trading with Companhia Paranaense and Companhia Paranaense

The main advantage of trading using opposite Companhia Paranaense and Companhia Paranaense positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Companhia Paranaense 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 Companhia Paranaense 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.

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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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.