Correlation Between TTW Public and Companhia

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

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

Diversification Opportunities for TTW Public and Companhia

-0.23

Correlation Coefficient

TTW Public  Companhia

Very good diversification

The 3 months correlation between TTW and Companhia is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding TTW Public and Companhia de Saneamento in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Companhia de Saneamento and TTW Public 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 TTW Public are associated (or correlated) with Companhia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Companhia de Saneamento has no effect on the direction of TTW Public i.e., TTW Public and Companhia go up and down completely randomly.

Pair Corralation between TTW Public and Companhia

Assuming the 90 days trading horizon TTW Public is expected to generate 1.1 times more return on investment than Companhia. However, TTW Public is 1.1 times more volatile than Companhia de Saneamento. It trades about 0.01 of its potential returns per unit of risk. Companhia de Saneamento is currently generating about -0.1 per unit of risk. If you would invest  24.00  in TTW Public on September 23, 2024 and sell it today you would earn a total of  0.00  from holding TTW Public or generate 0.0% return on investment over 90 days.

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

TTW Public  vs.  Companhia de Saneamento

TTW Public

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TTW Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, TTW Public is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Companhia de Saneamento

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Companhia de Saneamento has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's forward-looking indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with TTW Public and Companhia

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

The idea behind TTW Public and Companhia de Saneamento 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.