Correlation Between Alupar Investimento and Companhia

Can any of the company-specific risk be diversified away by investing in both Alupar Investimento and Companhia 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 Alupar Investimento and Companhia into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Alupar Investimento SA and Companhia de Saneamento, you can compare the effects of market volatilities on Alupar Investimento and Companhia 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 Alupar Investimento with a short position of Companhia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alupar Investimento and Companhia.

Diversification Opportunities for Alupar Investimento and Companhia

0.75

Correlation Coefficient

Alupar Investimento  Companhia

Poor diversification

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

Pair Corralation between Alupar Investimento and Companhia

Assuming the 90 days trading horizon Alupar Investimento SA is expected to under-perform the Companhia. But the stock apears to be less risky and, when comparing its historical volatility, Alupar Investimento SA is 1.59 times less risky than Companhia. The stock trades about -0.18 of its potential returns per unit of risk. The Companhia de Saneamento is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,935  in Companhia de Saneamento on September 3, 2024 and sell it today you would earn a total of  90.00  from holding Companhia de Saneamento or generate 3.07% return on investment over 90 days.

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

Alupar Investimento SA  vs.  Companhia de Saneamento

Alupar Investimento

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alupar Investimento SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Companhia de Saneamento

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Companhia de Saneamento are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Companhia is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Alupar Investimento and Companhia

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

The idea behind Alupar Investimento SA and Companhia de Saneamento 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.