Correlation Between SPORT LISBOA and WIMFARM SA

Can any of the company-specific risk be diversified away by investing in both SPORT LISBOA and WIMFARM SA 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 SPORT LISBOA and WIMFARM SA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SPORT LISBOA E and WIMFARM SA EO, you can compare the effects of market volatilities on SPORT LISBOA and WIMFARM SA 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 SPORT LISBOA with a short position of WIMFARM SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPORT LISBOA and WIMFARM SA.

Diversification Opportunities for SPORT LISBOA and WIMFARM SA

0.15

Correlation Coefficient

SPORT LISBOA  WIMFARM SA

Average diversification

The 3 months correlation between SPORT and WIMFARM is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding SPORT LISBOA E and WIMFARM SA EO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WIMFARM SA EO and SPORT LISBOA 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 SPORT LISBOA E are associated (or correlated) with WIMFARM SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WIMFARM SA EO has no effect on the direction of SPORT LISBOA i.e., SPORT LISBOA and WIMFARM SA go up and down completely randomly.

Pair Corralation between SPORT LISBOA and WIMFARM SA

Assuming the 90 days horizon SPORT LISBOA E is expected to under-perform the WIMFARM SA. But the stock apears to be less risky and, when comparing its historical volatility, SPORT LISBOA E is 1.82 times less risky than WIMFARM SA. The stock trades about -0.03 of its potential returns per unit of risk. The WIMFARM SA EO is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  365.00  in WIMFARM SA EO on October 8, 2024 and sell it today you would lose (20.00) from holding WIMFARM SA EO or give up 5.48% of portfolio value over 90 days.

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

SPORT LISBOA E  vs.  WIMFARM SA EO

SPORT LISBOA E

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SPORT LISBOA E has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, SPORT LISBOA is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

WIMFARM SA EO

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WIMFARM SA EO has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, WIMFARM SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with SPORT LISBOA and WIMFARM SA

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

The idea behind SPORT LISBOA E and WIMFARM SA EO 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.