Correlation Between Navigator and Sonae SGPS

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

Diversification Opportunities for Navigator and Sonae SGPS

-0.33
  Correlation Coefficient

Very good diversification

The 3 months correlation between Navigator and Sonae is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding The Navigator and Sonae SGPS SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sonae SGPS SA 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 Sonae SGPS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sonae SGPS SA has no effect on the direction of Navigator i.e., Navigator and Sonae SGPS go up and down completely randomly.

Pair Corralation between Navigator and Sonae SGPS

Assuming the 90 days trading horizon Navigator is expected to generate 11.16 times less return on investment than Sonae SGPS. In addition to that, Navigator is 1.23 times more volatile than Sonae SGPS SA. It trades about 0.0 of its total potential returns per unit of risk. Sonae SGPS SA is currently generating about 0.07 per unit of volatility. If you would invest  94.00  in Sonae SGPS SA on November 28, 2024 and sell it today you would earn a total of  3.00  from holding Sonae SGPS SA or generate 3.19% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

The Navigator  vs.  Sonae SGPS SA

 Performance 
       Timeline  
Navigator 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
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.
Sonae SGPS SA 

Risk-Adjusted Performance

Modest

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Sonae SGPS SA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Sonae SGPS is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Navigator and Sonae SGPS Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Navigator and Sonae SGPS

The main advantage of trading using opposite Navigator and Sonae SGPS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Navigator position performs unexpectedly, Sonae 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 Sonae SGPS will offset losses from the drop in Sonae SGPS's long position.
The idea behind The Navigator and Sonae SGPS SA 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.

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