Correlation Between REN Redes and Altri SGPS

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

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

Diversification Opportunities for REN Redes and Altri SGPS

0.79

Correlation Coefficient

REN Redes  Altri SGPS

Poor diversification

The 3 months correlation between REN and Altri is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding REN Redes and Altri SGPS SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Altri SGPS SA and REN Redes 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 REN Redes are associated (or correlated) with Altri SGPS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Altri SGPS SA has no effect on the direction of REN Redes i.e., REN Redes and Altri SGPS go up and down completely randomly.

Pair Corralation between REN Redes and Altri SGPS

Assuming the 90 days trading horizon REN Redes is expected to generate 0.94 times more return on investment than Altri SGPS. However, REN Redes is 1.06 times less risky than Altri SGPS. It trades about 0.26 of its potential returns per unit of risk. Altri SGPS SA is currently generating about 0.17 per unit of risk. If you would invest  227.00  in REN Redes on December 29, 2024 and sell it today you would earn a total of  47.00  from holding REN Redes or generate 20.7% return on investment over 90 days.

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

REN Redes  vs.  Altri SGPS SA

REN Redes

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in REN Redes are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, REN Redes unveiled solid returns over the last few months and may actually be approaching a breakup point.

Altri SGPS SA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Altri SGPS SA are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Altri SGPS unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with REN Redes and Altri SGPS

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

The idea behind REN Redes and Altri 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.