Correlation Between Companhia and Itasa Investimentos

Can any of the company-specific risk be diversified away by investing in both Companhia and Itasa Investimentos 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 Itasa Investimentos 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 Itasa Investimentos, you can compare the effects of market volatilities on Companhia and Itasa Investimentos 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 Itasa Investimentos. Check out your portfolio center. Please also check ongoing floating volatility patterns of Companhia and Itasa Investimentos.

Diversification Opportunities for Companhia and Itasa Investimentos

0.45

Correlation Coefficient

Companhia  Itasa Investimentos

Very weak diversification

The 3 months correlation between Companhia and Itasa is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Companhia de Saneamento and Itasa Investimentos in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Itasa Investimentos 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 Itasa Investimentos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Itasa Investimentos has no effect on the direction of Companhia i.e., Companhia and Itasa Investimentos go up and down completely randomly.

Pair Corralation between Companhia and Itasa Investimentos

Assuming the 90 days trading horizon Companhia de Saneamento is expected to generate 1.74 times more return on investment than Itasa Investimentos. However, Companhia is 1.74 times more volatile than Itasa Investimentos. It trades about 0.22 of its potential returns per unit of risk. Itasa Investimentos is currently generating about 0.05 per unit of risk. If you would invest  1,989  in Companhia de Saneamento on April 21, 2025 and sell it today you would earn a total of  623.00  from holding Companhia de Saneamento or generate 31.32% return on investment over 90 days.

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

Companhia de Saneamento  vs.  Itasa Investimentos

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 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Companhia unveiled solid returns over the last few months and may actually be approaching a breakup point.

Itasa Investimentos

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Itasa Investimentos are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Itasa Investimentos 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 Itasa Investimentos

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

The idea behind Companhia de Saneamento and Itasa Investimentos 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.