Correlation Between REN Redes and Benfica

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

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

Diversification Opportunities for REN Redes and Benfica

-0.13

Correlation Coefficient

REN Redes  Benfica

Good diversification

The 3 months correlation between REN and Benfica is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding REN Redes and Benfica in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Benfica 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 Benfica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Benfica has no effect on the direction of REN Redes i.e., REN Redes and Benfica go up and down completely randomly.

Pair Corralation between REN Redes and Benfica

Assuming the 90 days trading horizon REN Redes is expected to generate 0.54 times more return on investment than Benfica. However, REN Redes is 1.84 times less risky than Benfica. It trades about 0.19 of its potential returns per unit of risk. Benfica is currently generating about 0.04 per unit of risk. If you would invest  232.00  in REN Redes on December 5, 2024 and sell it today you would earn a total of  25.00  from holding REN Redes or generate 10.78% return on investment over 90 days.

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

REN Redes  vs.  Benfica

REN Redes

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in REN Redes are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, REN Redes may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Benfica

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Benfica are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, Benfica is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with REN Redes and Benfica

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

The idea behind REN Redes and Benfica 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.