Correlation Between Sidma SA and Terna Energy

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

By analyzing existing cross correlation between Sidma SA Steel and Terna Energy Societe, you can compare the effects of market volatilities on Sidma SA and Terna Energy 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 Sidma SA with a short position of Terna Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sidma SA and Terna Energy.

Diversification Opportunities for Sidma SA and Terna Energy

-0.46

Correlation Coefficient

Sidma SA  Terna Energy

Very good diversification

The 3 months correlation between Sidma and Terna is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Sidma SA Steel and Terna Energy Societe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Terna Energy Societe and Sidma SA 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 Sidma SA Steel are associated (or correlated) with Terna Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Terna Energy Societe has no effect on the direction of Sidma SA i.e., Sidma SA and Terna Energy go up and down completely randomly.

Pair Corralation between Sidma SA and Terna Energy

Assuming the 90 days trading horizon Sidma SA Steel is expected to under-perform the Terna Energy. In addition to that, Sidma SA is 3.11 times more volatile than Terna Energy Societe. It trades about -0.05 of its total potential returns per unit of risk. Terna Energy Societe is currently generating about 0.07 per unit of volatility. If you would invest  1,999  in Terna Energy Societe on December 23, 2024 and sell it today you would earn a total of  41.00  from holding Terna Energy Societe or generate 2.05% return on investment over 90 days.

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

Sidma SA Steel  vs.  Terna Energy Societe

Sidma SA Steel

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sidma SA Steel has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Sidma SA is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Terna Energy Societe

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Terna Energy Societe are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical and fundamental indicators, Terna Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sidma SA and Terna Energy

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

The idea behind Sidma SA Steel and Terna Energy Societe 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.

Check out your portfolio center.

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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.