Correlation Between Paranapanema and Teka Tecelagem

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

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

Diversification Opportunities for Paranapanema and Teka Tecelagem

-0.03

Correlation Coefficient

Paranapanema  Teka Tecelagem

Good diversification

The 3 months correlation between Paranapanema and Teka is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Paranapanema SA and Teka Tecelagem Kuehnrich in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Teka Tecelagem Kuehnrich and Paranapanema 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 Paranapanema SA are associated (or correlated) with Teka Tecelagem. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Teka Tecelagem Kuehnrich has no effect on the direction of Paranapanema i.e., Paranapanema and Teka Tecelagem go up and down completely randomly.

Pair Corralation between Paranapanema and Teka Tecelagem

Assuming the 90 days trading horizon Paranapanema SA is expected to generate 1.15 times more return on investment than Teka Tecelagem. However, Paranapanema is 1.15 times more volatile than Teka Tecelagem Kuehnrich. It trades about 0.16 of its potential returns per unit of risk. Teka Tecelagem Kuehnrich is currently generating about 0.18 per unit of risk. If you would invest  102.00  in Paranapanema SA on October 8, 2024 and sell it today you would earn a total of  10.00  from holding Paranapanema SA or generate 9.8% return on investment over 90 days.

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

Paranapanema SA  vs.  Teka Tecelagem Kuehnrich

Paranapanema SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Paranapanema 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.

Teka Tecelagem Kuehnrich

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Teka Tecelagem Kuehnrich are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Teka Tecelagem unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Paranapanema and Teka Tecelagem

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

The idea behind Paranapanema SA and Teka Tecelagem Kuehnrich 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.