Correlation Between Companhia Energtica and Banco Do

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Can any of the company-specific risk be diversified away by investing in both Companhia Energtica and Banco Do 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 Energtica and Banco Do into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Companhia Energtica De and Banco Do Brasil, you can compare the effects of market volatilities on Companhia Energtica and Banco Do 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 Energtica with a short position of Banco Do. Check out your portfolio center. Please also check ongoing floating volatility patterns of Companhia Energtica and Banco Do.

Diversification Opportunities for Companhia Energtica and Banco Do

0.47
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Companhia and Banco is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Companhia Energtica De and Banco Do Brasil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco Do Brasil and Companhia Energtica 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 Energtica De are associated (or correlated) with Banco Do. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco Do Brasil has no effect on the direction of Companhia Energtica i.e., Companhia Energtica and Banco Do go up and down completely randomly.

Pair Corralation between Companhia Energtica and Banco Do

Assuming the 90 days trading horizon Companhia Energtica De is expected to generate 1.41 times more return on investment than Banco Do. However, Companhia Energtica is 1.41 times more volatile than Banco Do Brasil. It trades about -0.06 of its potential returns per unit of risk. Banco Do Brasil is currently generating about -0.11 per unit of risk. If you would invest  1,183  in Companhia Energtica De on September 3, 2022 and sell it today you would lose (47.00)  from holding Companhia Energtica De or give up 3.97% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Companhia Energtica De  vs.  Banco Do Brasil

 Performance (%) 
       Timeline  
Companhia Energtica 
Companhia Performance
0 of 100
Over the last 90 days Companhia Energtica De has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Companhia Energtica is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Companhia Price Channel

Banco Do Brasil 
Banco Performance
0 of 100
Over the last 90 days Banco Do Brasil has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Banco Price Channel

Companhia Energtica and Banco Do Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Companhia Energtica and Banco Do

The main advantage of trading using opposite Companhia Energtica and Banco Do positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Companhia Energtica position performs unexpectedly, Banco Do 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 Banco Do will offset losses from the drop in Banco Do's long position.
Companhia Energtica vs. Companhia Energtica De
The idea behind Companhia Energtica De and Banco Do Brasil 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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Check out your portfolio center. 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 Analyst Recommendations module to analyst recommendations and target price estimates broken down by several categories.

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