Correlation Between Benfica and Mota Engil

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

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

Diversification Opportunities for Benfica and Mota Engil

0.1

Correlation Coefficient

Benfica  Mota Engil

Average diversification

The 3 months correlation between Benfica and Mota is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Benfica and Mota Engil SGPS SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mota Engil SGPS and Benfica 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 Benfica are associated (or correlated) with Mota Engil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mota Engil SGPS has no effect on the direction of Benfica i.e., Benfica and Mota Engil go up and down completely randomly.

Pair Corralation between Benfica and Mota Engil

Assuming the 90 days trading horizon Benfica is expected to under-perform the Mota Engil. But the stock apears to be less risky and, when comparing its historical volatility, Benfica is 1.11 times less risky than Mota Engil. The stock trades about 0.0 of its potential returns per unit of risk. The Mota Engil SGPS SA is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  109.00  in Mota Engil SGPS SA on September 16, 2024 and sell it today you would earn a total of  173.00  from holding Mota Engil SGPS SA or generate 158.72% return on investment over 90 days.

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

Benfica  vs.  Mota Engil SGPS SA

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.

Mota Engil SGPS

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Mota Engil SGPS SA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain essential indicators, Mota Engil unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Benfica and Mota Engil

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

The idea behind Benfica and Mota Engil 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.