Correlation Between Companhia Paranaense and METISA Metalrgica

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

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

Diversification Opportunities for Companhia Paranaense and METISA Metalrgica

0.46

Correlation Coefficient

Companhia Paranaense  METISA Metalrgica

Very weak diversification

The 3 months correlation between Companhia and METISA is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Companhia Paranaense de and METISA Metalrgica Timboense in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on METISA Metalrgica and Companhia Paranaense 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 Paranaense de are associated (or correlated) with METISA Metalrgica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of METISA Metalrgica has no effect on the direction of Companhia Paranaense i.e., Companhia Paranaense and METISA Metalrgica go up and down completely randomly.

Pair Corralation between Companhia Paranaense and METISA Metalrgica

Assuming the 90 days trading horizon Companhia Paranaense de is expected to generate 1.97 times more return on investment than METISA Metalrgica. However, Companhia Paranaense is 1.97 times more volatile than METISA Metalrgica Timboense. It trades about 0.02 of its potential returns per unit of risk. METISA Metalrgica Timboense is currently generating about -0.1 per unit of risk. If you would invest  1,148  in Companhia Paranaense de on August 31, 2024 and sell it today you would earn a total of  12.00  from holding Companhia Paranaense de or generate 1.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	92.06%
Values	Daily Returns

Companhia Paranaense de  vs.  METISA Metalrgica Timboense

Companhia Paranaense

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Companhia Paranaense de are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Companhia Paranaense may actually be approaching a critical reversion point that can send shares even higher in December 2024.

METISA Metalrgica

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days METISA Metalrgica Timboense has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Preferred Stock's basic indicators remain comparatively stable which may send shares a bit higher in December 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Companhia Paranaense and METISA Metalrgica

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

The idea behind Companhia Paranaense de and METISA Metalrgica Timboense 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..