Correlation Between Companhia Paranaense and UNITIL

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

Diversification Opportunities for Companhia Paranaense and UNITIL

0.28

Correlation Coefficient

Companhia Paranaense  UNITIL

Modest diversification

The 3 months correlation between Companhia and UNITIL is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Companhia Paranaense de and UNITIL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UNITIL 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 UNITIL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UNITIL has no effect on the direction of Companhia Paranaense i.e., Companhia Paranaense and UNITIL go up and down completely randomly.

Pair Corralation between Companhia Paranaense and UNITIL

Considering the 90-day investment horizon Companhia Paranaense de is expected to under-perform the UNITIL. In addition to that, Companhia Paranaense is 1.2 times more volatile than UNITIL. It trades about -0.07 of its total potential returns per unit of risk. UNITIL is currently generating about 0.0 per unit of volatility. If you would invest  5,987  in UNITIL on August 30, 2024 and sell it today you would lose (37.00) from holding UNITIL or give up 0.62% of portfolio value over 90 days.

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

Companhia Paranaense de  vs.  UNITIL

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 latest conflicting performance, the Stock's essential indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

UNITIL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days UNITIL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, UNITIL is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Companhia Paranaense and UNITIL

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

The idea behind Companhia Paranaense de and UNITIL 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.