Correlation Between CPFL Energia and ISA ENERGIA

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

By analyzing existing cross correlation between CPFL Energia SA and ISA ENERGIA BRASIL, you can compare the effects of market volatilities on CPFL Energia and ISA ENERGIA 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 CPFL Energia with a short position of ISA ENERGIA. Check out your portfolio center. Please also check ongoing floating volatility patterns of CPFL Energia and ISA ENERGIA.

Diversification Opportunities for CPFL Energia and ISA ENERGIA

0.52

Correlation Coefficient

CPFL Energia  ISA ENERGIA

Very weak diversification

The 3 months correlation between CPFL and ISA is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding CPFL Energia SA and ISA ENERGIA BRASIL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ISA ENERGIA BRASIL and CPFL Energia 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 CPFL Energia SA are associated (or correlated) with ISA ENERGIA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ISA ENERGIA BRASIL has no effect on the direction of CPFL Energia i.e., CPFL Energia and ISA ENERGIA go up and down completely randomly.

Pair Corralation between CPFL Energia and ISA ENERGIA

Assuming the 90 days trading horizon CPFL Energia SA is expected to generate 1.14 times more return on investment than ISA ENERGIA. However, CPFL Energia is 1.14 times more volatile than ISA ENERGIA BRASIL. It trades about 0.11 of its potential returns per unit of risk. ISA ENERGIA BRASIL is currently generating about 0.01 per unit of risk. If you would invest  3,531  in CPFL Energia SA on April 21, 2025 and sell it today you would earn a total of  287.00  from holding CPFL Energia SA or generate 8.13% return on investment over 90 days.

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

CPFL Energia SA  vs.  ISA ENERGIA BRASIL

CPFL Energia SA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CPFL Energia SA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, CPFL Energia may actually be approaching a critical reversion point that can send shares even higher in August 2025.

ISA ENERGIA BRASIL

Risk-Adjusted Performance

Very Weak

Over the last 90 days ISA ENERGIA BRASIL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, ISA ENERGIA 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 CPFL Energia and ISA ENERGIA

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

The idea behind CPFL Energia SA and ISA ENERGIA 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.