Correlation Between Paranapanema and Companhia

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

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

Diversification Opportunities for Paranapanema and Companhia

-0.9

Correlation Coefficient

Paranapanema  Companhia

Pay attention - limited upside

The 3 months correlation between Paranapanema and Companhia is -0.9. Overlapping area represents the amount of risk that can be diversified away by holding Paranapanema SA 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 Paranapanema 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 Paranapanema SA 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 Paranapanema i.e., Paranapanema and Companhia go up and down completely randomly.

Pair Corralation between Paranapanema and Companhia

Assuming the 90 days trading horizon Paranapanema SA is expected to under-perform the Companhia. In addition to that, Paranapanema is 1.58 times more volatile than Companhia de Saneamento. It trades about -0.07 of its total potential returns per unit of risk. Companhia de Saneamento is currently generating about 0.25 per unit of volatility. If you would invest  560.00  in Companhia de Saneamento on April 23, 2025 and sell it today you would earn a total of  206.00  from holding Companhia de Saneamento or generate 36.79% return on investment over 90 days.

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

Paranapanema SA  vs.  Companhia de Saneamento

Paranapanema SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Paranapanema SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in August 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

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 19 (%) 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 Paranapanema and Companhia

The main advantage of trading using opposite Paranapanema and Companhia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Paranapanema 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 Paranapanema SA 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.