Correlation Between ITALIAN WINE and SPORT LISBOA

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

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

Diversification Opportunities for ITALIAN WINE and SPORT LISBOA

-0.36

Correlation Coefficient

ITALIAN WINE  SPORT LISBOA

Very good diversification

The 3 months correlation between ITALIAN and SPORT is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding ITALIAN WINE BRANDS and SPORT LISBOA E in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPORT LISBOA E and ITALIAN WINE 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 ITALIAN WINE BRANDS are associated (or correlated) with SPORT LISBOA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPORT LISBOA E has no effect on the direction of ITALIAN WINE i.e., ITALIAN WINE and SPORT LISBOA go up and down completely randomly.

Pair Corralation between ITALIAN WINE and SPORT LISBOA

Assuming the 90 days horizon ITALIAN WINE BRANDS is expected to under-perform the SPORT LISBOA. But the stock apears to be less risky and, when comparing its historical volatility, ITALIAN WINE BRANDS is 1.3 times less risky than SPORT LISBOA. The stock trades about -0.06 of its potential returns per unit of risk. The SPORT LISBOA E is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  313.00  in SPORT LISBOA E on December 29, 2024 and sell it today you would earn a total of  1.00  from holding SPORT LISBOA E or generate 0.32% return on investment over 90 days.

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

ITALIAN WINE BRANDS  vs.  SPORT LISBOA E

ITALIAN WINE BRANDS

Risk-Adjusted Performance

Very Weak

Over the last 90 days ITALIAN WINE BRANDS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

SPORT LISBOA E

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SPORT LISBOA E are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with ITALIAN WINE and SPORT LISBOA

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

The idea behind ITALIAN WINE BRANDS and SPORT LISBOA E 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.