Correlation Between Companhia Paranaense and Brookfield Infrastructure

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

Diversification Opportunities for Companhia Paranaense and Brookfield Infrastructure

0.75

Correlation Coefficient

Companhia Paranaense  Brookfield Infrastructure

Poor diversification

The 3 months correlation between Companhia and Brookfield is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Companhia Paranaense de and Brookfield Infrastructure Part in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brookfield Infrastructure 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 Brookfield Infrastructure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brookfield Infrastructure has no effect on the direction of Companhia Paranaense i.e., Companhia Paranaense and Brookfield Infrastructure go up and down completely randomly.

Pair Corralation between Companhia Paranaense and Brookfield Infrastructure

Given the investment horizon of 90 days Companhia Paranaense is expected to generate 2.89 times less return on investment than Brookfield Infrastructure. In addition to that, Companhia Paranaense is 1.01 times more volatile than Brookfield Infrastructure Partners. It trades about 0.02 of its total potential returns per unit of risk. Brookfield Infrastructure Partners is currently generating about 0.07 per unit of volatility. If you would invest  2,845  in Brookfield Infrastructure Partners on February 4, 2024 and sell it today you would earn a total of  83.00  from holding Brookfield Infrastructure Partners or generate 2.92% return on investment over 90 days.

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

Companhia Paranaense de  vs.  Brookfield Infrastructure Part

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 rather sound basic indicators, Companhia Paranaense is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Brookfield Infrastructure

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brookfield Infrastructure Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable forward indicators, Brookfield Infrastructure is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Companhia Paranaense and Brookfield Infrastructure

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

The idea behind Companhia Paranaense de and Brookfield Infrastructure Partners 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.

Check out your portfolio center.

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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.