Correlation Between Companhia Paranaense and IShares MSCI

Can any of the company-specific risk be diversified away by investing in both Companhia Paranaense and IShares MSCI 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 IShares MSCI 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 iShares MSCI USA, you can compare the effects of market volatilities on Companhia Paranaense and IShares MSCI 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 IShares MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Companhia Paranaense and IShares MSCI.

Diversification Opportunities for Companhia Paranaense and IShares MSCI

-0.48

Correlation Coefficient

Companhia Paranaense  IShares MSCI

Very good diversification

The 3 months correlation between Companhia and IShares is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Companhia Paranaense de and iShares MSCI USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI USA 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 IShares MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares MSCI USA has no effect on the direction of Companhia Paranaense i.e., Companhia Paranaense and IShares MSCI go up and down completely randomly.

Pair Corralation between Companhia Paranaense and IShares MSCI

Assuming the 90 days trading horizon Companhia Paranaense de is expected to generate 5.98 times more return on investment than IShares MSCI. However, Companhia Paranaense is 5.98 times more volatile than iShares MSCI USA. It trades about 0.01 of its potential returns per unit of risk. iShares MSCI USA is currently generating about 0.05 per unit of risk. If you would invest  138.00  in Companhia Paranaense de on October 7, 2024 and sell it today you would lose (4.00) from holding Companhia Paranaense de or give up 2.9% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.83%
Values	Daily Returns

Companhia Paranaense de  vs.  iShares MSCI USA

Companhia Paranaense

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Companhia Paranaense de has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Companhia Paranaense is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

iShares MSCI USA

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in iShares MSCI USA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, IShares MSCI 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 Paranaense and IShares MSCI

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

The idea behind Companhia Paranaense de and iShares MSCI USA 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.