Correlation Between Navigator and Sonaecom SGPS

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

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

Diversification Opportunities for Navigator and Sonaecom SGPS

0.73

Correlation Coefficient

Navigator  Sonaecom SGPS

Poor diversification

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

Pair Corralation between Navigator and Sonaecom SGPS

Assuming the 90 days trading horizon The Navigator is expected to generate 0.54 times more return on investment than Sonaecom SGPS. However, The Navigator is 1.86 times less risky than Sonaecom SGPS. It trades about -0.08 of its potential returns per unit of risk. Sonaecom SGPS is currently generating about -0.08 per unit of risk. If you would invest  368.00  in The Navigator on September 16, 2024 and sell it today you would lose (23.00) from holding The Navigator or give up 6.25% of portfolio value over 90 days.

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

The Navigator  vs.  Sonaecom SGPS

Navigator

Risk-Adjusted Performance

0 of 100

Very Weak

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

Sonaecom SGPS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sonaecom SGPS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Navigator and Sonaecom SGPS

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

The idea behind The Navigator and Sonaecom SGPS 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.