Correlation Between Montauk Renewables and Companhia Paranaense

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

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

Diversification Opportunities for Montauk Renewables and Companhia Paranaense

-0.58

Correlation Coefficient

Montauk Renewables  Companhia Paranaense

Excellent diversification

The 3 months correlation between Montauk and Companhia is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Montauk Renewables and Companhia Paranaense de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Companhia Paranaense and Montauk Renewables 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 Montauk Renewables 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 Montauk Renewables i.e., Montauk Renewables and Companhia Paranaense go up and down completely randomly.

Pair Corralation between Montauk Renewables and Companhia Paranaense

Given the investment horizon of 90 days Montauk Renewables is expected to generate 2.19 times more return on investment than Companhia Paranaense. However, Montauk Renewables is 2.19 times more volatile than Companhia Paranaense de. It trades about -0.01 of its potential returns per unit of risk. Companhia Paranaense de is currently generating about -0.05 per unit of risk. If you would invest  487.00  in Montauk Renewables on August 18, 2024 and sell it today you would lose (75.00) from holding Montauk Renewables or give up 15.4% of portfolio value over 90 days.

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

Montauk Renewables  vs.  Companhia Paranaense de

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 quite persistent basic indicators, Montauk Renewables is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

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 conflicting performance in the last few months, the Stock's essential indicators remain relatively invariable which may send shares a bit higher in December 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Montauk Renewables and Companhia Paranaense

The main advantage of trading using opposite Montauk Renewables and Companhia Paranaense positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Montauk Renewables 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 Montauk Renewables 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.