Correlation Between NOS SGPS and EDP Energias

Can any of the company-specific risk be diversified away by investing in both NOS SGPS and EDP Energias 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 NOS SGPS and EDP Energias into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between NOS SGPS SA and EDP Energias, you can compare the effects of market volatilities on NOS SGPS and EDP Energias 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 NOS SGPS with a short position of EDP Energias. Check out your portfolio center. Please also check ongoing floating volatility patterns of NOS SGPS and EDP Energias.

Diversification Opportunities for NOS SGPS and EDP Energias

0.87

Correlation Coefficient

NOS SGPS  EDP Energias

Very poor diversification

The 3 months correlation between NOS and EDP is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding NOS SGPS SA and EDP Energias in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EDP Energias and NOS SGPS 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 NOS SGPS SA are associated (or correlated) with EDP Energias. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EDP Energias has no effect on the direction of NOS SGPS i.e., NOS SGPS and EDP Energias go up and down completely randomly.

Pair Corralation between NOS SGPS and EDP Energias

Assuming the 90 days trading horizon NOS SGPS SA is expected to generate 0.69 times more return on investment than EDP Energias. However, NOS SGPS SA is 1.45 times less risky than EDP Energias. It trades about 0.02 of its potential returns per unit of risk. EDP Energias is currently generating about -0.03 per unit of risk. If you would invest  320.00  in NOS SGPS SA on September 4, 2024 and sell it today you would earn a total of  22.00  from holding NOS SGPS SA or generate 6.88% return on investment over 90 days.

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

NOS SGPS SA  vs.  EDP Energias

NOS SGPS SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NOS SGPS SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, NOS SGPS is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

EDP Energias

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EDP Energias has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with NOS SGPS and EDP Energias

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

The idea behind NOS SGPS SA and EDP Energias 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 CEOs Directory module to screen CEOs from public companies around the world.