Correlation Between National Retail and Companhia Paranaense

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

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

Diversification Opportunities for National Retail and Companhia Paranaense

0.5

Correlation Coefficient

National Retail  Companhia Paranaense

Very weak diversification

The 3 months correlation between National and Companhia is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding National Retail Properties and Companhia Paranaense de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Companhia Paranaense and National Retail 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 National Retail Properties are associated (or correlated) with Companhia Paranaense. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Companhia Paranaense has no effect on the direction of National Retail i.e., National Retail and Companhia Paranaense go up and down completely randomly.

Pair Corralation between National Retail and Companhia Paranaense

Assuming the 90 days trading horizon National Retail Properties is expected to under-perform the Companhia Paranaense. But the stock apears to be less risky and, when comparing its historical volatility, National Retail Properties is 7.59 times less risky than Companhia Paranaense. The stock trades about 0.0 of its potential returns per unit of risk. The Companhia Paranaense de is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  123.00  in Companhia Paranaense de on September 19, 2024 and sell it today you would earn a total of  11.00  from holding Companhia Paranaense de or generate 8.94% return on investment over 90 days.

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

National Retail Properties  vs.  Companhia Paranaense de

National Retail Prop

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days National Retail Properties has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, National Retail is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Companhia Paranaense

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Companhia Paranaense de are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Companhia Paranaense may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with National Retail and Companhia Paranaense

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

The idea behind National Retail Properties and Companhia Paranaense de 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.

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 the AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.