Correlation Between Itasa Investimentos and Companhiade Eletricidade

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

By analyzing existing cross correlation between Itasa Investimentos and Companhiade Eletricidade do, you can compare the effects of market volatilities on Itasa Investimentos and Companhiade Eletricidade 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 Itasa Investimentos with a short position of Companhiade Eletricidade. Check out your portfolio center. Please also check ongoing floating volatility patterns of Itasa Investimentos and Companhiade Eletricidade.

Diversification Opportunities for Itasa Investimentos and Companhiade Eletricidade

0.05

Correlation Coefficient

Itasa Investimentos  Companhiade Eletricidade

Significant diversification

The 3 months correlation between Itasa and Companhiade is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Itasa Investimentos and Companhiade Eletricidade do in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Companhiade Eletricidade and Itasa Investimentos 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 Itasa Investimentos are associated (or correlated) with Companhiade Eletricidade. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Companhiade Eletricidade has no effect on the direction of Itasa Investimentos i.e., Itasa Investimentos and Companhiade Eletricidade go up and down completely randomly.

Pair Corralation between Itasa Investimentos and Companhiade Eletricidade

Assuming the 90 days trading horizon Itasa Investimentos is expected to under-perform the Companhiade Eletricidade. But the preferred stock apears to be less risky and, when comparing its historical volatility, Itasa Investimentos is 1.01 times less risky than Companhiade Eletricidade. The preferred stock trades about -0.17 of its potential returns per unit of risk. The Companhiade Eletricidade do is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  3,920  in Companhiade Eletricidade do on September 3, 2024 and sell it today you would lose (120.00) from holding Companhiade Eletricidade do or give up 3.06% of portfolio value over 90 days.

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

Itasa Investimentos  vs.  Companhiade Eletricidade do

Itasa Investimentos

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Itasa Investimentos 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 Preferred Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Companhiade Eletricidade

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Companhiade Eletricidade do has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Companhiade Eletricidade 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 Itasa Investimentos and Companhiade Eletricidade

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

The idea behind Itasa Investimentos and Companhiade Eletricidade do 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.