Correlation Between Cemepe Investimentos and Companhia

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

By analyzing existing cross correlation between Cemepe Investimentos SA and Companhia de Saneamento, you can compare the effects of market volatilities on Cemepe Investimentos and 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 Cemepe Investimentos with a short position of Companhia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cemepe Investimentos and Companhia.

Diversification Opportunities for Cemepe Investimentos and Companhia

0.76

Correlation Coefficient

Cemepe Investimentos  Companhia

Poor diversification

The 3 months correlation between Cemepe and Companhia is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Cemepe Investimentos SA and Companhia de Saneamento in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Companhia de Saneamento and Cemepe 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 Cemepe Investimentos SA are associated (or correlated) with Companhia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Companhia de Saneamento has no effect on the direction of Cemepe Investimentos i.e., Cemepe Investimentos and Companhia go up and down completely randomly.

Pair Corralation between Cemepe Investimentos and Companhia

Assuming the 90 days trading horizon Cemepe Investimentos SA is expected to under-perform the Companhia. In addition to that, Cemepe Investimentos is 1.46 times more volatile than Companhia de Saneamento. It trades about -0.02 of its total potential returns per unit of risk. Companhia de Saneamento is currently generating about -0.02 per unit of volatility. If you would invest  2,510  in Companhia de Saneamento on September 13, 2024 and sell it today you would lose (71.00) from holding Companhia de Saneamento or give up 2.83% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Cemepe Investimentos SA  vs.  Companhia de Saneamento

Cemepe Investimentos

Risk-Adjusted Performance

0 of 100

Very Weak

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

Companhia de Saneamento

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Cemepe Investimentos and Companhia

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

The idea behind Cemepe Investimentos SA and Companhia de Saneamento 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.