Correlation Between ISA ENERGIA and CPFL Energia

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

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

Diversification Opportunities for ISA ENERGIA and CPFL Energia

0.48

Correlation Coefficient

ISA ENERGIA  CPFL Energia

Very weak diversification

The 3 months correlation between ISA and CPFL is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding ISA ENERGIA BRASIL and CPFL Energia SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CPFL Energia SA and ISA 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 ISA ENERGIA BRASIL are associated (or correlated) with CPFL Energia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CPFL Energia SA has no effect on the direction of ISA ENERGIA i.e., ISA ENERGIA and CPFL Energia go up and down completely randomly.

Pair Corralation between ISA ENERGIA and CPFL Energia

Assuming the 90 days trading horizon ISA ENERGIA BRASIL is expected to under-perform the CPFL Energia. But the stock apears to be less risky and, when comparing its historical volatility, ISA ENERGIA BRASIL is 1.21 times less risky than CPFL Energia. The stock trades about -0.03 of its potential returns per unit of risk. The CPFL Energia SA is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  3,619  in CPFL Energia SA on April 24, 2025 and sell it today you would earn a total of  231.00  from holding CPFL Energia SA or generate 6.38% return on investment over 90 days.

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

ISA ENERGIA BRASIL  vs.  CPFL Energia SA

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.

CPFL Energia SA

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CPFL Energia SA are ranked lower than 6 (%) 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.

Pair Trading with ISA ENERGIA and CPFL Energia

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

The idea behind ISA ENERGIA BRASIL and CPFL Energia SA 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.