Correlation Between Companhia Paranaense and Utilities Portfolio

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

Diversification Opportunities for Companhia Paranaense and Utilities Portfolio

-0.63

Correlation Coefficient

Companhia Paranaense  Utilities Portfolio

Excellent diversification

The 3 months correlation between Companhia and Utilities is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Companhia Paranaense de and Utilities Portfolio Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Utilities Portfolio 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 Utilities Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Utilities Portfolio has no effect on the direction of Companhia Paranaense i.e., Companhia Paranaense and Utilities Portfolio go up and down completely randomly.

Pair Corralation between Companhia Paranaense and Utilities Portfolio

Given the investment horizon of 90 days Companhia Paranaense de is expected to under-perform the Utilities Portfolio. In addition to that, Companhia Paranaense is 2.19 times more volatile than Utilities Portfolio Utilities. It trades about -0.11 of its total potential returns per unit of risk. Utilities Portfolio Utilities is currently generating about 0.07 per unit of volatility. If you would invest  12,085  in Utilities Portfolio Utilities on September 13, 2024 and sell it today you would earn a total of  527.00  from holding Utilities Portfolio Utilities or generate 4.36% return on investment over 90 days.

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

Companhia Paranaense de  vs.  Utilities Portfolio Utilities

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. In spite of uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Utilities Portfolio

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Utilities Portfolio Utilities are ranked lower than 5 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Utilities Portfolio is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Companhia Paranaense and Utilities Portfolio

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

The idea behind Companhia Paranaense de and Utilities Portfolio Utilities 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.

Check out your portfolio center.

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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.