Correlation Between Companhia and Tronox Pigmentos

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

Diversification Opportunities for Companhia and Tronox Pigmentos

-0.68

Correlation Coefficient

Companhia  Tronox Pigmentos

Excellent diversification

The 3 months correlation between Companhia and Tronox is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Companhia de Saneamento and Tronox Pigmentos do in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tronox Pigmentos 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 Tronox Pigmentos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tronox Pigmentos has no effect on the direction of Companhia i.e., Companhia and Tronox Pigmentos go up and down completely randomly.

Pair Corralation between Companhia and Tronox Pigmentos

Assuming the 90 days trading horizon Companhia de Saneamento is expected to generate 1.05 times more return on investment than Tronox Pigmentos. However, Companhia is 1.05 times more volatile than Tronox Pigmentos do. It trades about 0.23 of its potential returns per unit of risk. Tronox Pigmentos do is currently generating about -0.05 per unit of risk. If you would invest  552.00  in Companhia de Saneamento on April 23, 2025 and sell it today you would earn a total of  143.00  from holding Companhia de Saneamento or generate 25.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

Companhia de Saneamento  vs.  Tronox Pigmentos do

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 18 (%) 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.

Tronox Pigmentos

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tronox Pigmentos do has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Tronox Pigmentos is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Companhia and Tronox Pigmentos

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

The idea behind Companhia de Saneamento and Tronox Pigmentos do 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.