Correlation Between Fica Empreendimentos and CPFL Energia

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

By analyzing existing cross correlation between Fica Empreendimentos Imobiliarios and CPFL Energia SA, you can compare the effects of market volatilities on Fica Empreendimentos and CPFL Energia 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 Fica Empreendimentos with a short position of CPFL Energia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fica Empreendimentos and CPFL Energia.

Diversification Opportunities for Fica Empreendimentos and CPFL Energia

-0.75

Correlation Coefficient

Fica Empreendimentos  CPFL Energia

Pay attention - limited upside

The 3 months correlation between Fica and CPFL is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Fica Empreendimentos Imobiliar and CPFL Energia SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CPFL Energia SA and Fica Empreendimentos 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 Fica Empreendimentos Imobiliarios are associated (or correlated) with CPFL Energia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CPFL Energia SA has no effect on the direction of Fica Empreendimentos i.e., Fica Empreendimentos and CPFL Energia go up and down completely randomly.

Pair Corralation between Fica Empreendimentos and CPFL Energia

Assuming the 90 days trading horizon Fica Empreendimentos Imobiliarios is expected to generate 4.49 times more return on investment than CPFL Energia. However, Fica Empreendimentos is 4.49 times more volatile than CPFL Energia SA. It trades about 0.12 of its potential returns per unit of risk. CPFL Energia SA is currently generating about -0.04 per unit of risk. If you would invest  850.00  in Fica Empreendimentos Imobiliarios on September 3, 2024 and sell it today you would earn a total of  250.00  from holding Fica Empreendimentos Imobiliarios or generate 29.41% return on investment over 90 days.

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

Fica Empreendimentos Imobiliar  vs.  CPFL Energia SA

Fica Empreendimentos

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fica Empreendimentos Imobiliarios are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Fica Empreendimentos unveiled solid returns over the last few months and may actually be approaching a breakup point.

CPFL Energia SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CPFL Energia SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, CPFL Energia is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Fica Empreendimentos and CPFL Energia

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

The idea behind Fica Empreendimentos Imobiliarios and CPFL Energia SA 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.