Correlation Between SPORTING and SPORT LISBOA

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

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

Diversification Opportunities for SPORTING and SPORT LISBOA

0.25

Correlation Coefficient

SPORTING  SPORT LISBOA

Modest diversification

The 3 months correlation between SPORTING and SPORT is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding SPORTING and SPORT LISBOA E in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPORT LISBOA E and SPORTING 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 SPORTING are associated (or correlated) with SPORT LISBOA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPORT LISBOA E has no effect on the direction of SPORTING i.e., SPORTING and SPORT LISBOA go up and down completely randomly.

Pair Corralation between SPORTING and SPORT LISBOA

Assuming the 90 days trading horizon SPORTING is expected to generate 0.62 times more return on investment than SPORT LISBOA. However, SPORTING is 1.62 times less risky than SPORT LISBOA. It trades about 0.15 of its potential returns per unit of risk. SPORT LISBOA E is currently generating about 0.03 per unit of risk. If you would invest  80.00  in SPORTING on December 24, 2024 and sell it today you would earn a total of  16.00  from holding SPORTING or generate 20.0% return on investment over 90 days.

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

SPORTING  vs.  SPORT LISBOA E

SPORTING

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SPORTING are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical and fundamental indicators, SPORTING unveiled solid returns over the last few months and may actually be approaching a breakup point.

SPORT LISBOA E

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SPORT LISBOA E are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, SPORT LISBOA is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with SPORTING and SPORT LISBOA

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

The idea behind SPORTING and SPORT LISBOA E 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.