Correlation Between Companhia and CCR SA

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

Diversification Opportunities for Companhia and CCR SA

0.49

Correlation Coefficient

Companhia  CCR SA

Very weak diversification

The 3 months correlation between Companhia and CCR is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Companhia de Saneamento and CCR SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CCR SA 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 CCR SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CCR SA has no effect on the direction of Companhia i.e., Companhia and CCR SA go up and down completely randomly.

Pair Corralation between Companhia and CCR SA

Assuming the 90 days trading horizon Companhia de Saneamento is expected to under-perform the CCR SA. In addition to that, Companhia is 1.16 times more volatile than CCR SA. It trades about -0.12 of its total potential returns per unit of risk. CCR SA is currently generating about 0.05 per unit of volatility. If you would invest  1,351  in CCR SA on April 20, 2025 and sell it today you would earn a total of  8.00  from holding CCR SA or generate 0.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	47.62%
Values	Daily Returns

Companhia de Saneamento  vs.  CCR SA

Companhia de Saneamento

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Companhia de Saneamento are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Companhia is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

CCR SA

Risk-Adjusted Performance

OK

Over the last 90 days CCR SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively uncertain basic indicators, CCR SA may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with Companhia and CCR SA

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

The idea behind Companhia de Saneamento and CCR 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.