Correlation Between Mota Engil and CTT Correios

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

Diversification Opportunities for Mota Engil and CTT Correios

0.77

Correlation Coefficient

Mota Engil  CTT Correios

Poor diversification

The 3 months correlation between Mota and CTT is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Mota Engil SGPS SA and CTT Correios de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CTT Correios de 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 CTT Correios. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CTT Correios de has no effect on the direction of Mota Engil i.e., Mota Engil and CTT Correios go up and down completely randomly.

Pair Corralation between Mota Engil and CTT Correios

Assuming the 90 days trading horizon Mota Engil is expected to generate 2.0 times less return on investment than CTT Correios. In addition to that, Mota Engil is 2.13 times more volatile than CTT Correios de. It trades about 0.1 of its total potential returns per unit of risk. CTT Correios de is currently generating about 0.42 per unit of volatility. If you would invest  523.00  in CTT Correios de on December 27, 2024 and sell it today you would earn a total of  235.00  from holding CTT Correios de or generate 44.93% return on investment over 90 days.

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

Mota Engil SGPS SA  vs.  CTT Correios de

Mota Engil SGPS

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mota Engil SGPS SA are ranked lower than 7 (%) 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.

CTT Correios de

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in CTT Correios de are ranked lower than 33 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, CTT Correios unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mota Engil and CTT Correios

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

The idea behind Mota Engil SGPS SA and CTT Correios 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.

Check out your portfolio center.

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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.