Correlation Between Benfica and Sporting Clube

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

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

Diversification Opportunities for Benfica and Sporting Clube

-0.36

Correlation Coefficient

Benfica  Sporting Clube

Very good diversification

The 3 months correlation between Benfica and Sporting is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Benfica and Sporting Clube de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sporting Clube de 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 Sporting Clube. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sporting Clube de has no effect on the direction of Benfica i.e., Benfica and Sporting Clube go up and down completely randomly.

Pair Corralation between Benfica and Sporting Clube

Assuming the 90 days trading horizon Benfica is expected to generate 1.84 times more return on investment than Sporting Clube. However, Benfica is 1.84 times more volatile than Sporting Clube de. It trades about 0.1 of its potential returns per unit of risk. Sporting Clube de is currently generating about -0.21 per unit of risk. If you would invest  305.00  in Benfica on September 16, 2024 and sell it today you would earn a total of  22.00  from holding Benfica or generate 7.21% return on investment over 90 days.

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

Benfica  vs.  Sporting Clube de

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.

Sporting Clube de

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sporting Clube de has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental drivers, Sporting Clube is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Benfica and Sporting Clube

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

The idea behind Benfica and Sporting Clube de 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..