Correlation Between SPORT LISBOA and UMWELTBANK

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

Diversification Opportunities for SPORT LISBOA and UMWELTBANK

-0.2

Correlation Coefficient

SPORT LISBOA  UMWELTBANK

Good diversification

The 3 months correlation between SPORT and UMWELTBANK is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding SPORT LISBOA E and UMWELTBANK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UMWELTBANK 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 UMWELTBANK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UMWELTBANK has no effect on the direction of SPORT LISBOA i.e., SPORT LISBOA and UMWELTBANK go up and down completely randomly.

Pair Corralation between SPORT LISBOA and UMWELTBANK

Assuming the 90 days horizon SPORT LISBOA E is expected to under-perform the UMWELTBANK. But the stock apears to be less risky and, when comparing its historical volatility, SPORT LISBOA E is 1.41 times less risky than UMWELTBANK. The stock trades about -0.21 of its potential returns per unit of risk. The UMWELTBANK is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  622.00  in UMWELTBANK on October 3, 2024 and sell it today you would earn a total of  14.00  from holding UMWELTBANK or generate 2.25% return on investment over 90 days.

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

SPORT LISBOA E  vs.  UMWELTBANK

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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

UMWELTBANK

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in UMWELTBANK are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain forward-looking signals, UMWELTBANK exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SPORT LISBOA and UMWELTBANK

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

The idea behind SPORT LISBOA E and UMWELTBANK 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 Transaction History module to view history of all your transactions and understand their impact on performance.