Correlation Between Companhia and Companhiade Eletricidade

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

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

Diversification Opportunities for Companhia and Companhiade Eletricidade

-0.23

Correlation Coefficient

Companhia  Companhiade Eletricidade

Very good diversification

The 3 months correlation between Companhia and Companhiade is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Companhia de Saneamento and Companhiade Eletricidade do in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Companhiade Eletricidade and Companhia 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 Companhia de Saneamento 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 Companhia i.e., Companhia and Companhiade Eletricidade go up and down completely randomly.

Pair Corralation between Companhia and Companhiade Eletricidade

Assuming the 90 days trading horizon Companhia de Saneamento is expected to under-perform the Companhiade Eletricidade. In addition to that, Companhia is 1.34 times more volatile than Companhiade Eletricidade do. It trades about -0.27 of its total potential returns per unit of risk. Companhiade Eletricidade do is currently generating about 0.11 per unit of volatility. If you would invest  3,824  in Companhiade Eletricidade do on October 6, 2024 and sell it today you would earn a total of  76.00  from holding Companhiade Eletricidade do or generate 1.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.44%
Values	Daily Returns

Companhia de Saneamento  vs.  Companhiade Eletricidade do

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.

Companhiade Eletricidade

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Companhiade Eletricidade do are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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 Companhia and Companhiade Eletricidade

The main advantage of trading using opposite Companhia and Companhiade Eletricidade positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Companhia 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 Companhia de Saneamento 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..