Correlation Between Sporting Clube and Benfica

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

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

Diversification Opportunities for Sporting Clube and Benfica

-0.09

Correlation Coefficient

Sporting Clube  Benfica

Good diversification

The 3 months correlation between Sporting and Benfica is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Sporting Clube de and Benfica in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Benfica and Sporting Clube 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 Clube de 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 Sporting Clube i.e., Sporting Clube and Benfica go up and down completely randomly.

Pair Corralation between Sporting Clube and Benfica

Assuming the 90 days trading horizon Sporting Clube de is expected to generate 1.49 times more return on investment than Benfica. However, Sporting Clube is 1.49 times more volatile than Benfica. It trades about 0.03 of its potential returns per unit of risk. Benfica is currently generating about 0.0 per unit of risk. If you would invest  79.00  in Sporting Clube de on September 16, 2024 and sell it today you would earn a total of  17.00  from holding Sporting Clube de or generate 21.52% return on investment over 90 days.

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

Sporting Clube de  vs.  Benfica

Sporting Clube de

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sporting Clube de are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, Sporting Clube may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Benfica

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Benfica has generated negative risk-adjusted returns adding no value to investors with long positions. 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 Sporting Clube and Benfica

The main advantage of trading using opposite Sporting Clube and Benfica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sporting Clube 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 Sporting Clube de 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.