Correlation Between WILLIS LEASE and Companhia Paranaense

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

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

Diversification Opportunities for WILLIS LEASE and Companhia Paranaense

-0.3

Correlation Coefficient

WILLIS LEASE  Companhia Paranaense

Very good diversification

The 3 months correlation between WILLIS and Companhia is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding WILLIS LEASE FIN and Companhia Paranaense de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Companhia Paranaense and WILLIS LEASE 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 WILLIS LEASE FIN are associated (or correlated) with Companhia Paranaense. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Companhia Paranaense has no effect on the direction of WILLIS LEASE i.e., WILLIS LEASE and Companhia Paranaense go up and down completely randomly.

Pair Corralation between WILLIS LEASE and Companhia Paranaense

Assuming the 90 days horizon WILLIS LEASE FIN is expected to generate 1.01 times more return on investment than Companhia Paranaense. However, WILLIS LEASE is 1.01 times more volatile than Companhia Paranaense de. It trades about 0.23 of its potential returns per unit of risk. Companhia Paranaense de is currently generating about 0.03 per unit of risk. If you would invest  10,887  in WILLIS LEASE FIN on September 17, 2024 and sell it today you would earn a total of  9,313  from holding WILLIS LEASE FIN or generate 85.54% return on investment over 90 days.

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

WILLIS LEASE FIN  vs.  Companhia Paranaense de

WILLIS LEASE FIN

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in WILLIS LEASE FIN are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, WILLIS LEASE reported solid returns over the last few months and may actually be approaching a breakup point.

Companhia Paranaense

Risk-Adjusted Performance

2 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Companhia Paranaense de are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Companhia Paranaense may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with WILLIS LEASE and Companhia Paranaense

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

The idea behind WILLIS LEASE FIN and Companhia Paranaense de 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.