Correlation Between Itasa Investimentos and CTEEP Companhia

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

By analyzing existing cross correlation between Itasa Investimentos and CTEEP Companhia, you can compare the effects of market volatilities on Itasa Investimentos and CTEEP Companhia 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 CTEEP Companhia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Itasa Investimentos and CTEEP Companhia.

Diversification Opportunities for Itasa Investimentos and CTEEP Companhia

0.62

Correlation Coefficient

Itasa Investimentos  CTEEP Companhia

Poor diversification

The 3 months correlation between Itasa and CTEEP is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Itasa Investimentos and CTEEP Companhia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CTEEP Companhia 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 CTEEP Companhia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CTEEP Companhia has no effect on the direction of Itasa Investimentos i.e., Itasa Investimentos and CTEEP Companhia go up and down completely randomly.

Pair Corralation between Itasa Investimentos and CTEEP Companhia

Assuming the 90 days trading horizon Itasa Investimentos is expected to generate 1.16 times more return on investment than CTEEP Companhia. However, Itasa Investimentos is 1.16 times more volatile than CTEEP Companhia. It trades about 0.0 of its potential returns per unit of risk. CTEEP Companhia is currently generating about -0.03 per unit of risk. If you would invest  910.00  in Itasa Investimentos on November 29, 2024 and sell it today you would lose (11.00) from holding Itasa Investimentos or give up 1.21% of portfolio value over 90 days.

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

Itasa Investimentos  vs.  CTEEP Companhia

Itasa Investimentos

Risk-Adjusted Performance

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 comparatively stable basic indicators, Itasa Investimentos is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

CTEEP Companhia

Risk-Adjusted Performance

Very Weak

Over the last 90 days CTEEP Companhia has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, CTEEP Companhia 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 CTEEP Companhia

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

The idea behind Itasa Investimentos and CTEEP Companhia 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.