Correlation Between Jeronimo Martins and Banco Comercial

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

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

Diversification Opportunities for Jeronimo Martins and Banco Comercial

0.73

Correlation Coefficient

Jeronimo Martins  Banco Comercial

Poor diversification

The 3 months correlation between Jeronimo and Banco is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Jeronimo Martins SGPS and Banco Comercial Portugues in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco Comercial Portugues and Jeronimo Martins 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 Jeronimo Martins SGPS are associated (or correlated) with Banco Comercial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco Comercial Portugues has no effect on the direction of Jeronimo Martins i.e., Jeronimo Martins and Banco Comercial go up and down completely randomly.

Pair Corralation between Jeronimo Martins and Banco Comercial

Assuming the 90 days trading horizon Jeronimo Martins is expected to generate 2.25 times less return on investment than Banco Comercial. But when comparing it to its historical volatility, Jeronimo Martins SGPS is 1.86 times less risky than Banco Comercial. It trades about 0.1 of its potential returns per unit of risk. Banco Comercial Portugues is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  47.00  in Banco Comercial Portugues on December 30, 2024 and sell it today you would earn a total of  9.00  from holding Banco Comercial Portugues or generate 19.15% return on investment over 90 days.

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

Jeronimo Martins SGPS  vs.  Banco Comercial Portugues

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.

Banco Comercial Portugues

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Banco Comercial Portugues are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Banco Comercial unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Jeronimo Martins and Banco Comercial

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

The idea behind Jeronimo Martins SGPS and Banco Comercial Portugues 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.