Correlation Between Sonae SGPS and Corticeira Amorim

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

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

Diversification Opportunities for Sonae SGPS and Corticeira Amorim

0.76

Correlation Coefficient

Sonae SGPS  Corticeira Amorim

Poor diversification

The 3 months correlation between Sonae and Corticeira is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Sonae SGPS SA and Corticeira Amorim in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Corticeira Amorim and Sonae SGPS 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 Sonae SGPS SA are associated (or correlated) with Corticeira Amorim. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Corticeira Amorim has no effect on the direction of Sonae SGPS i.e., Sonae SGPS and Corticeira Amorim go up and down completely randomly.

Pair Corralation between Sonae SGPS and Corticeira Amorim

Assuming the 90 days trading horizon Sonae SGPS SA is expected to generate 0.78 times more return on investment than Corticeira Amorim. However, Sonae SGPS SA is 1.28 times less risky than Corticeira Amorim. It trades about -0.12 of its potential returns per unit of risk. Corticeira Amorim is currently generating about -0.14 per unit of risk. If you would invest  97.00  in Sonae SGPS SA on September 16, 2024 and sell it today you would lose (6.00) from holding Sonae SGPS SA or give up 6.19% of portfolio value over 90 days.

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

Sonae SGPS SA  vs.  Corticeira Amorim

Sonae SGPS SA

Risk-Adjusted Performance

0 of 100

Very Weak

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

Corticeira Amorim

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Corticeira Amorim has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Sonae SGPS and Corticeira Amorim

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

The idea behind Sonae SGPS SA and Corticeira Amorim 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.