Correlation Between Cofina SGPS and CARSALESCOM

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

Diversification Opportunities for Cofina SGPS and CARSALESCOM

0.52

Correlation Coefficient

Cofina SGPS  CARSALESCOM

Very weak diversification

The 3 months correlation between Cofina and CARSALESCOM is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Cofina SGPS SA and CARSALESCOM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CARSALESCOM 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 CARSALESCOM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CARSALESCOM has no effect on the direction of Cofina SGPS i.e., Cofina SGPS and CARSALESCOM go up and down completely randomly.

Pair Corralation between Cofina SGPS and CARSALESCOM

Assuming the 90 days horizon Cofina SGPS SA is expected to generate 8.34 times more return on investment than CARSALESCOM. However, Cofina SGPS is 8.34 times more volatile than CARSALESCOM. It trades about 0.01 of its potential returns per unit of risk. CARSALESCOM is currently generating about 0.03 per unit of risk. If you would invest  2,750  in Cofina SGPS SA on October 10, 2024 and sell it today you would lose (965.00) from holding Cofina SGPS SA or give up 35.09% of portfolio value over 90 days.

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

Cofina SGPS SA  vs.  CARSALESCOM

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 unsteady basic indicators, Cofina SGPS may actually be approaching a critical reversion point that can send shares even higher in February 2025.

CARSALESCOM

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CARSALESCOM are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, CARSALESCOM is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Cofina SGPS and CARSALESCOM

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

The idea behind Cofina SGPS SA and CARSALESCOM 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.