Correlation Between EDP Energias and Jeronimo Martins

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

By analyzing existing cross correlation between EDP Energias and Jeronimo Martins SGPS, you can compare the effects of market volatilities on EDP Energias and Jeronimo Martins 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 EDP Energias with a short position of Jeronimo Martins. Check out your portfolio center. Please also check ongoing floating volatility patterns of EDP Energias and Jeronimo Martins.

Diversification Opportunities for EDP Energias and Jeronimo Martins

-0.05

Correlation Coefficient

EDP Energias  Jeronimo Martins

Good diversification

The 3 months correlation between EDP and Jeronimo is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding EDP Energias and Jeronimo Martins SGPS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jeronimo Martins SGPS and EDP Energias 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 EDP Energias are associated (or correlated) with Jeronimo Martins. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jeronimo Martins SGPS has no effect on the direction of EDP Energias i.e., EDP Energias and Jeronimo Martins go up and down completely randomly.

Pair Corralation between EDP Energias and Jeronimo Martins

Assuming the 90 days trading horizon EDP Energias is expected to generate 2.38 times less return on investment than Jeronimo Martins. In addition to that, EDP Energias is 1.42 times more volatile than Jeronimo Martins SGPS. It trades about 0.03 of its total potential returns per unit of risk. Jeronimo Martins SGPS is currently generating about 0.1 per unit of volatility. If you would invest  1,822  in Jeronimo Martins SGPS on December 30, 2024 and sell it today you would earn a total of  153.00  from holding Jeronimo Martins SGPS or generate 8.4% return on investment over 90 days.

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

EDP Energias  vs.  Jeronimo Martins SGPS

EDP Energias

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in EDP Energias are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, EDP Energias is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Jeronimo Martins SGPS

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Jeronimo Martins SGPS are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Jeronimo Martins may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with EDP Energias and Jeronimo Martins

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

The idea behind EDP Energias and Jeronimo Martins SGPS 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 Directory module to find actively traded commodities issued by global exchanges.