Correlation Between Companhia Paranaense and Montauk Renewables

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

Diversification Opportunities for Companhia Paranaense and Montauk Renewables

0.73

Correlation Coefficient

Companhia Paranaense  Montauk Renewables

Poor diversification

The 3 months correlation between Companhia and Montauk is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Companhia Paranaense de and Montauk Renewables in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Montauk Renewables 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 Montauk Renewables. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Montauk Renewables has no effect on the direction of Companhia Paranaense i.e., Companhia Paranaense and Montauk Renewables go up and down completely randomly.

Pair Corralation between Companhia Paranaense and Montauk Renewables

Considering the 90-day investment horizon Companhia Paranaense de is expected to generate 0.47 times more return on investment than Montauk Renewables. However, Companhia Paranaense de is 2.11 times less risky than Montauk Renewables. It trades about -0.19 of its potential returns per unit of risk. Montauk Renewables is currently generating about -0.09 per unit of risk. If you would invest  772.00  in Companhia Paranaense de on January 28, 2024 and sell it today you would lose (58.00) from holding Companhia Paranaense de or give up 7.51% 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.  Montauk Renewables

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 uncertain 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.

Montauk Renewables

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Montauk Renewables has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in May 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Companhia Paranaense and Montauk Renewables

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

The idea behind Companhia Paranaense de and Montauk Renewables 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 Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.