Correlation Between CTEEP Companhia and Banco ABC

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

By analyzing existing cross correlation between CTEEP Companhia and Banco ABC Brasil, you can compare the effects of market volatilities on CTEEP Companhia and Banco ABC 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 Banco ABC. Check out your portfolio center. Please also check ongoing floating volatility patterns of CTEEP Companhia and Banco ABC.

Diversification Opportunities for CTEEP Companhia and Banco ABC

0.28

Correlation Coefficient

CTEEP Companhia  Banco ABC

Modest diversification

The 3 months correlation between CTEEP and Banco is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding CTEEP Companhia and Banco ABC Brasil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco ABC Brasil 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 Banco ABC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco ABC Brasil has no effect on the direction of CTEEP Companhia i.e., CTEEP Companhia and Banco ABC go up and down completely randomly.

Pair Corralation between CTEEP Companhia and Banco ABC

Assuming the 90 days trading horizon CTEEP Companhia is expected to under-perform the Banco ABC. But the preferred stock apears to be less risky and, when comparing its historical volatility, CTEEP Companhia is 1.12 times less risky than Banco ABC. The preferred stock trades about -0.02 of its potential returns per unit of risk. The Banco ABC Brasil is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,931  in Banco ABC Brasil on December 30, 2024 and sell it today you would earn a total of  146.00  from holding Banco ABC Brasil or generate 7.56% return on investment over 90 days.

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

CTEEP Companhia  vs.  Banco ABC Brasil

CTEEP Companhia

Risk-Adjusted Performance

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

Banco ABC Brasil

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Banco ABC Brasil are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Banco ABC may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with CTEEP Companhia and Banco ABC

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

The idea behind CTEEP Companhia and Banco ABC Brasil 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.