Correlation Between Companhia and T4F Entretenimento

Can any of the company-specific risk be diversified away by investing in both Companhia and T4F Entretenimento 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 T4F Entretenimento 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 T4F Entretenimento SA, you can compare the effects of market volatilities on Companhia and T4F Entretenimento 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 T4F Entretenimento. Check out your portfolio center. Please also check ongoing floating volatility patterns of Companhia and T4F Entretenimento.

Diversification Opportunities for Companhia and T4F Entretenimento

-0.31

Correlation Coefficient

Companhia  T4F Entretenimento

Very good diversification

The 3 months correlation between Companhia and T4F is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Companhia de Saneamento and T4F Entretenimento SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on T4F Entretenimento 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 T4F Entretenimento. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of T4F Entretenimento has no effect on the direction of Companhia i.e., Companhia and T4F Entretenimento go up and down completely randomly.

Pair Corralation between Companhia and T4F Entretenimento

Assuming the 90 days trading horizon Companhia de Saneamento is expected to generate 0.41 times more return on investment than T4F Entretenimento. However, Companhia de Saneamento is 2.46 times less risky than T4F Entretenimento. It trades about 0.26 of its potential returns per unit of risk. T4F Entretenimento SA is currently generating about 0.04 per unit of risk. If you would invest  539.00  in Companhia de Saneamento on April 20, 2025 and sell it today you would earn a total of  159.00  from holding Companhia de Saneamento or generate 29.5% return on investment over 90 days.

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

Companhia de Saneamento  vs.  T4F Entretenimento 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 20 (%) 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.

T4F Entretenimento

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in T4F Entretenimento SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, T4F Entretenimento may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Companhia and T4F Entretenimento

The main advantage of trading using opposite Companhia and T4F Entretenimento positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Companhia position performs unexpectedly, T4F Entretenimento 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 T4F Entretenimento will offset losses from the drop in T4F Entretenimento's long position.

The idea behind Companhia de Saneamento and T4F Entretenimento 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.