Correlation Between Cofina SGPS and Infrastrutture Wireless

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

By analyzing existing cross correlation between Cofina SGPS SA and Infrastrutture Wireless Italiane, you can compare the effects of market volatilities on Cofina SGPS and Infrastrutture Wireless 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 Cofina SGPS with a short position of Infrastrutture Wireless. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cofina SGPS and Infrastrutture Wireless.

Diversification Opportunities for Cofina SGPS and Infrastrutture Wireless

-0.19

Correlation Coefficient

Cofina SGPS  Infrastrutture Wireless

Good diversification

The 3 months correlation between Cofina and Infrastrutture is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Cofina SGPS SA and Infrastrutture Wireless Italia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Infrastrutture Wireless and Cofina SGPS 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 Cofina SGPS SA are associated (or correlated) with Infrastrutture Wireless. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Infrastrutture Wireless has no effect on the direction of Cofina SGPS i.e., Cofina SGPS and Infrastrutture Wireless go up and down completely randomly.

Pair Corralation between Cofina SGPS and Infrastrutture Wireless

Assuming the 90 days horizon Cofina SGPS SA is expected to generate 16.76 times more return on investment than Infrastrutture Wireless. However, Cofina SGPS is 16.76 times more volatile than Infrastrutture Wireless Italiane. It trades about 0.07 of its potential returns per unit of risk. Infrastrutture Wireless Italiane is currently generating about 0.19 per unit of risk. If you would invest  1,595  in Cofina SGPS SA on October 26, 2024 and sell it today you would lose (55.00) from holding Cofina SGPS SA or give up 3.45% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.74%
Values	Daily Returns

Cofina SGPS SA  vs.  Infrastrutture Wireless Italia

Cofina SGPS SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cofina SGPS SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Cofina SGPS is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Infrastrutture Wireless

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Infrastrutture Wireless Italiane has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Infrastrutture Wireless is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Cofina SGPS and Infrastrutture Wireless

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

The idea behind Cofina SGPS SA and Infrastrutture Wireless Italiane 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.