Correlation Between Companhia Paranaense and Sempra Energy

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

Diversification Opportunities for Companhia Paranaense and Sempra Energy

-0.74

Correlation Coefficient

Companhia Paranaense  Sempra Energy

Pay attention - limited upside

The 3 months correlation between Companhia and Sempra is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Companhia Paranaense de and Sempra Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sempra Energy 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 Sempra Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sempra Energy has no effect on the direction of Companhia Paranaense i.e., Companhia Paranaense and Sempra Energy go up and down completely randomly.

Pair Corralation between Companhia Paranaense and Sempra Energy

Considering the 90-day investment horizon Companhia Paranaense de is expected to under-perform the Sempra Energy. In addition to that, Companhia Paranaense is 1.48 times more volatile than Sempra Energy. It trades about -0.11 of its total potential returns per unit of risk. Sempra Energy is currently generating about 0.16 per unit of volatility. If you would invest  8,201  in Sempra Energy on September 3, 2024 and sell it today you would earn a total of  1,166  from holding Sempra Energy or generate 14.22% return on investment over 90 days.

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

Companhia Paranaense de  vs.  Sempra Energy

Companhia Paranaense

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Companhia Paranaense de has generated negative risk-adjusted returns adding no value to investors with long positions. Even with conflicting performance in the last few months, the Stock's essential indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Sempra Energy

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sempra Energy are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Sempra Energy exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Companhia Paranaense and Sempra Energy

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

The idea behind Companhia Paranaense de and Sempra Energy 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.