Correlation Between Companhia Paranaense and York Water

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

Diversification Opportunities for Companhia Paranaense and York Water

0.7

Correlation Coefficient

Companhia Paranaense  York Water

Poor diversification

The 3 months correlation between Companhia and York is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Companhia Paranaense de and The York Water in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on York Water 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 York Water. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of York Water has no effect on the direction of Companhia Paranaense i.e., Companhia Paranaense and York Water go up and down completely randomly.

Pair Corralation between Companhia Paranaense and York Water

Given the investment horizon of 90 days Companhia Paranaense de is expected to under-perform the York Water. In addition to that, Companhia Paranaense is 1.83 times more volatile than The York Water. It trades about -0.07 of its total potential returns per unit of risk. The York Water is currently generating about -0.07 per unit of volatility. If you would invest  3,828  in The York Water on August 31, 2024 and sell it today you would lose (230.00) from holding The York Water or give up 6.01% of portfolio value over 90 days.

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

Companhia Paranaense de  vs.  The York Water

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. In spite of latest fragile performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

York Water

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The York Water has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, York Water is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Companhia Paranaense and York Water

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

The idea behind Companhia Paranaense de and The York Water 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..