Correlation Between Mota Engil and Benfica

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

Diversification Opportunities for Mota Engil and Benfica

0.35

Correlation Coefficient

Mota Engil  Benfica

Weak diversification

The 3 months correlation between Mota and Benfica is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Mota Engil SGPS SA and Benfica in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Benfica 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 Benfica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Benfica has no effect on the direction of Mota Engil i.e., Mota Engil and Benfica go up and down completely randomly.

Pair Corralation between Mota Engil and Benfica

Assuming the 90 days trading horizon Mota Engil SGPS SA is expected to generate 1.76 times more return on investment than Benfica. However, Mota Engil is 1.76 times more volatile than Benfica. It trades about 0.11 of its potential returns per unit of risk. Benfica is currently generating about 0.02 per unit of risk. If you would invest  291.00  in Mota Engil SGPS SA on December 29, 2024 and sell it today you would earn a total of  60.00  from holding Mota Engil SGPS SA or generate 20.62% return on investment over 90 days.

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

Mota Engil SGPS SA  vs.  Benfica

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 8 (%) 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.

Benfica

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Benfica are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, Benfica is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Mota Engil and Benfica

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

The idea behind Mota Engil SGPS SA and Benfica 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.