Correlation Between Mota Engil and AFC Ajax

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

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

Diversification Opportunities for Mota Engil and AFC Ajax

-0.29

Correlation Coefficient

Mota Engil  AFC Ajax

Very good diversification

The 3 months correlation between Mota and AFC is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Mota Engil SGPS SA and AFC Ajax NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AFC Ajax NV and Mota Engil 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 Mota Engil SGPS SA are associated (or correlated) with AFC Ajax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AFC Ajax NV has no effect on the direction of Mota Engil i.e., Mota Engil and AFC Ajax go up and down completely randomly.

Pair Corralation between Mota Engil and AFC Ajax

Assuming the 90 days trading horizon Mota Engil SGPS SA is expected to generate 2.94 times more return on investment than AFC Ajax. However, Mota Engil is 2.94 times more volatile than AFC Ajax NV. It trades about 0.08 of its potential returns per unit of risk. AFC Ajax NV is currently generating about -0.01 per unit of risk. If you would invest  250.00  in Mota Engil SGPS SA on September 16, 2024 and sell it today you would earn a total of  32.00  from holding Mota Engil SGPS SA or generate 12.8% return on investment over 90 days.

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

Mota Engil SGPS SA  vs.  AFC Ajax NV

Mota Engil SGPS

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Mota Engil SGPS SA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain essential indicators, Mota Engil unveiled solid returns over the last few months and may actually be approaching a breakup point.

AFC Ajax NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AFC Ajax NV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, AFC Ajax is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Mota Engil and AFC Ajax

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

The idea behind Mota Engil SGPS SA and AFC Ajax NV 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.