Correlation Between Companhia Paranaense and Allfunds

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

Diversification Opportunities for Companhia Paranaense and Allfunds

-0.49

Correlation Coefficient

Companhia Paranaense  Allfunds

Very good diversification

The 3 months correlation between Companhia and Allfunds is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Companhia Paranaense de and Allfunds Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allfunds Group 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 Allfunds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allfunds Group has no effect on the direction of Companhia Paranaense i.e., Companhia Paranaense and Allfunds go up and down completely randomly.

Pair Corralation between Companhia Paranaense and Allfunds

Assuming the 90 days trading horizon Companhia Paranaense de is expected to generate 2.29 times more return on investment than Allfunds. However, Companhia Paranaense is 2.29 times more volatile than Allfunds Group. It trades about 0.04 of its potential returns per unit of risk. Allfunds Group is currently generating about 0.02 per unit of risk. If you would invest  136.00  in Companhia Paranaense de on September 14, 2024 and sell it today you would earn a total of  9.00  from holding Companhia Paranaense de or generate 6.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Companhia Paranaense de  vs.  Allfunds Group

Companhia Paranaense

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Companhia Paranaense de are ranked lower than 3 (%) 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.

Allfunds Group

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Allfunds Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Allfunds is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Companhia Paranaense and Allfunds

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

The idea behind Companhia Paranaense de and Allfunds Group 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.