Correlation Between Companhia Paranaense and Spire

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

Diversification Opportunities for Companhia Paranaense and Spire

0.53

Correlation Coefficient

Companhia Paranaense  Spire

Very weak diversification

The 3 months correlation between Companhia and Spire is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Companhia Paranaense de and Spire Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spire Inc 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 Spire. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spire Inc has no effect on the direction of Companhia Paranaense i.e., Companhia Paranaense and Spire go up and down completely randomly.

Pair Corralation between Companhia Paranaense and Spire

Given the investment horizon of 90 days Companhia Paranaense de is expected to generate 4.88 times more return on investment than Spire. However, Companhia Paranaense is 4.88 times more volatile than Spire Inc. It trades about 0.17 of its potential returns per unit of risk. Spire Inc is currently generating about 0.01 per unit of risk. If you would invest  533.00  in Companhia Paranaense de on December 29, 2024 and sell it today you would earn a total of  129.00  from holding Companhia Paranaense de or generate 24.2% return on investment over 90 days.

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

Companhia Paranaense de  vs.  Spire Inc

Companhia Paranaense

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Companhia Paranaense de are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting basic indicators, Companhia Paranaense exhibited solid returns over the last few months and may actually be approaching a breakup point.

Spire Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Spire Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Spire is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Companhia Paranaense and Spire

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

The idea behind Companhia Paranaense de and Spire Inc 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.