Correlation Between Mota Engil and Jeronimo Martins

Can any of the company-specific risk be diversified away by investing in both Mota Engil 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 Mota Engil and Jeronimo Martins 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 Jeronimo Martins SGPS, you can compare the effects of market volatilities on Mota Engil 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 Mota Engil with a short position of Jeronimo Martins. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mota Engil and Jeronimo Martins.

Diversification Opportunities for Mota Engil and Jeronimo Martins

0.56

Correlation Coefficient

Mota Engil  Jeronimo Martins

Very weak diversification

The 3 months correlation between Mota and Jeronimo is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Mota Engil SGPS SA 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 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 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 Mota Engil i.e., Mota Engil and Jeronimo Martins go up and down completely randomly.

Pair Corralation between Mota Engil and Jeronimo Martins

Assuming the 90 days trading horizon Mota Engil is expected to generate 1.31 times less return on investment than Jeronimo Martins. In addition to that, Mota Engil is 1.84 times more volatile than Jeronimo Martins SGPS. It trades about 0.14 of its total potential returns per unit of risk. Jeronimo Martins SGPS is currently generating about 0.35 per unit of volatility. If you would invest  1,905  in Jeronimo Martins SGPS on December 5, 2024 and sell it today you would earn a total of  187.00  from holding Jeronimo Martins SGPS or generate 9.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.65%
Values	Daily Returns

Mota Engil SGPS SA  vs.  Jeronimo Martins SGPS

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 10 (%) 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.

Jeronimo Martins SGPS

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Jeronimo Martins SGPS are ranked lower than 12 (%) 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 Mota Engil and Jeronimo Martins

The main advantage of trading using opposite Mota Engil and Jeronimo Martins positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mota Engil 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 Mota Engil SGPS SA 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.