Correlation Between Companhia and Kepler Weber

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

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

Diversification Opportunities for Companhia and Kepler Weber

0.34

Correlation Coefficient

Companhia  Kepler Weber

Weak diversification

The 3 months correlation between Companhia and Kepler is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Companhia de Saneamento and Kepler Weber SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kepler Weber SA and Companhia 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 de Saneamento are associated (or correlated) with Kepler Weber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kepler Weber SA has no effect on the direction of Companhia i.e., Companhia and Kepler Weber go up and down completely randomly.

Pair Corralation between Companhia and Kepler Weber

Assuming the 90 days trading horizon Companhia de Saneamento is expected to under-perform the Kepler Weber. But the stock apears to be less risky and, when comparing its historical volatility, Companhia de Saneamento is 1.59 times less risky than Kepler Weber. The stock trades about -0.19 of its potential returns per unit of risk. The Kepler Weber SA is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest  1,064  in Kepler Weber SA on February 8, 2024 and sell it today you would lose (56.00) from holding Kepler Weber SA or give up 5.26% of portfolio value over 90 days.

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

Companhia de Saneamento  vs.  Kepler Weber SA

Companhia de Saneamento

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Companhia de Saneamento are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Companhia is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Kepler Weber SA

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Kepler Weber SA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Kepler Weber may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Companhia and Kepler Weber

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

The idea behind Companhia de Saneamento and Kepler Weber SA 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.