Correlation Between Companhia and Dexxos Participaes

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

Diversification Opportunities for Companhia and Dexxos Participaes

0.75

Correlation Coefficient

Companhia  Dexxos Participaes

Poor diversification

The 3 months correlation between Companhia and Dexxos is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Companhia de Saneamento and Dexxos Participaes SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dexxos Participaes 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 Dexxos Participaes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dexxos Participaes has no effect on the direction of Companhia i.e., Companhia and Dexxos Participaes go up and down completely randomly.

Pair Corralation between Companhia and Dexxos Participaes

Assuming the 90 days trading horizon Companhia de Saneamento is expected to generate 0.78 times more return on investment than Dexxos Participaes. However, Companhia de Saneamento is 1.28 times less risky than Dexxos Participaes. It trades about 0.23 of its potential returns per unit of risk. Dexxos Participaes SA is currently generating about 0.14 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 Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Companhia de Saneamento  vs.  Dexxos Participaes SA

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 uncertain basic indicators, Companhia unveiled solid returns over the last few months and may actually be approaching a breakup point.

Dexxos Participaes

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dexxos Participaes SA are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Dexxos Participaes unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Companhia and Dexxos Participaes

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

The idea behind Companhia de Saneamento and Dexxos Participaes 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.