Correlation Between Companhia Energtica and Companhia

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

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

Diversification Opportunities for Companhia Energtica and Companhia

0.77

Correlation Coefficient

Companhia Energtica  Companhia

Poor diversification

The 3 months correlation between Companhia and Companhia is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Companhia Energtica de and Companhia de Saneamento in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Companhia de Saneamento and Companhia Energtica 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 Energtica de are associated (or correlated) with Companhia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Companhia de Saneamento has no effect on the direction of Companhia Energtica i.e., Companhia Energtica and Companhia go up and down completely randomly.

Pair Corralation between Companhia Energtica and Companhia

Assuming the 90 days trading horizon Companhia Energtica is expected to generate 1.66 times less return on investment than Companhia. But when comparing it to its historical volatility, Companhia Energtica de is 1.09 times less risky than Companhia. It trades about 0.14 of its potential returns per unit of risk. Companhia de Saneamento is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  9,880  in Companhia de Saneamento on March 25, 2025 and sell it today you would earn a total of  1,685  from holding Companhia de Saneamento or generate 17.05% return on investment over 90 days.

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

Companhia Energtica de  vs.  Companhia de Saneamento

Companhia Energtica

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Companhia Energtica de are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Companhia Energtica may actually be approaching a critical reversion point that can send shares even higher in July 2025.

Companhia de Saneamento

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Companhia de Saneamento are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Companhia unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Companhia Energtica and Companhia

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

The idea behind Companhia Energtica de and Companhia de Saneamento 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..