Correlation Between Companhia Siderrgica and Companhia Energtica

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

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

Diversification Opportunities for Companhia Siderrgica and Companhia Energtica

0.77

Correlation Coefficient

Companhia Siderrgica  Companhia Energtica

Poor diversification

The 3 months correlation between Companhia and Companhia is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Companhia Siderrgica Nacional and Companhia Energtica de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Companhia Energtica and Companhia Siderrgica 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 Siderrgica Nacional are associated (or correlated) with Companhia Energtica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Companhia Energtica has no effect on the direction of Companhia Siderrgica i.e., Companhia Siderrgica and Companhia Energtica go up and down completely randomly.

Pair Corralation between Companhia Siderrgica and Companhia Energtica

Assuming the 90 days trading horizon Companhia Siderrgica Nacional is expected to under-perform the Companhia Energtica. In addition to that, Companhia Siderrgica is 2.18 times more volatile than Companhia Energtica de. It trades about -0.11 of its total potential returns per unit of risk. Companhia Energtica de is currently generating about -0.03 per unit of volatility. If you would invest  1,168  in Companhia Energtica de on November 29, 2024 and sell it today you would lose (39.00) from holding Companhia Energtica de or give up 3.34% of portfolio value over 90 days.

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

Companhia Siderrgica Nacional  vs.  Companhia Energtica de

Companhia Siderrgica

Risk-Adjusted Performance

Very Weak

Over the last 90 days Companhia Siderrgica Nacional has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in March 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Companhia Energtica

Risk-Adjusted Performance

Very Weak

Over the last 90 days Companhia Energtica de has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Pair Trading with Companhia Siderrgica and Companhia Energtica

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

The idea behind Companhia Siderrgica Nacional and Companhia Energtica 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.