Correlation Between CTEEP Companhia and Empresa Metropolitana

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

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

Diversification Opportunities for CTEEP Companhia and Empresa Metropolitana

0.15

Correlation Coefficient

CTEEP Companhia  Empresa Metropolitana

Average diversification

The 3 months correlation between CTEEP and Empresa is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding CTEEP Companhia and Empresa Metropolitana de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Empresa Metropolitana and CTEEP 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 CTEEP Companhia are associated (or correlated) with Empresa Metropolitana. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Empresa Metropolitana has no effect on the direction of CTEEP Companhia i.e., CTEEP Companhia and Empresa Metropolitana go up and down completely randomly.

Pair Corralation between CTEEP Companhia and Empresa Metropolitana

Assuming the 90 days trading horizon CTEEP Companhia is expected to generate 0.5 times more return on investment than Empresa Metropolitana. However, CTEEP Companhia is 1.99 times less risky than Empresa Metropolitana. It trades about 0.04 of its potential returns per unit of risk. Empresa Metropolitana de is currently generating about 0.0 per unit of risk. If you would invest  2,505  in CTEEP Companhia on September 4, 2024 and sell it today you would earn a total of  653.00  from holding CTEEP Companhia or generate 26.07% return on investment over 90 days.

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

CTEEP Companhia  vs.  Empresa Metropolitana de

CTEEP Companhia

Risk-Adjusted Performance

0 of 100

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 newest stock price uproar, may contribute to short-horizon losses for the private investors.

Empresa Metropolitana

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind CTEEP Companhia and Empresa Metropolitana de 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.