Correlation Between Multilaser Industrial and CPFL Energia

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

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

Diversification Opportunities for Multilaser Industrial and CPFL Energia

0.73

Correlation Coefficient

Multilaser Industrial  CPFL Energia

Poor diversification

The 3 months correlation between Multilaser and CPFL is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Multilaser Industrial SA 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 Multilaser Industrial 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 Multilaser Industrial SA 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 Multilaser Industrial i.e., Multilaser Industrial and CPFL Energia go up and down completely randomly.

Pair Corralation between Multilaser Industrial and CPFL Energia

Assuming the 90 days trading horizon Multilaser Industrial SA is expected to under-perform the CPFL Energia. In addition to that, Multilaser Industrial is 3.65 times more volatile than CPFL Energia SA. It trades about -0.14 of its total potential returns per unit of risk. CPFL Energia SA is currently generating about -0.09 per unit of volatility. If you would invest  3,237  in CPFL Energia SA on October 4, 2024 and sell it today you would lose (78.00) from holding CPFL Energia SA or give up 2.41% of portfolio value over 90 days.

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

Multilaser Industrial SA  vs.  CPFL Energia SA

Multilaser Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

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

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 latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Multilaser Industrial and CPFL Energia

The main advantage of trading using opposite Multilaser Industrial and CPFL Energia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Multilaser Industrial 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 Multilaser Industrial SA 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.

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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.