Correlation Between Sonae SGPS and CTT Correios

Can any of the company-specific risk be diversified away by investing in both Sonae SGPS and CTT Correios 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 CTT Correios 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 CTT Correios de, you can compare the effects of market volatilities on Sonae SGPS and CTT Correios 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 CTT Correios. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sonae SGPS and CTT Correios.

Diversification Opportunities for Sonae SGPS and CTT Correios

0.89

Correlation Coefficient

Sonae SGPS  CTT Correios

Very poor diversification

The 3 months correlation between Sonae and CTT is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Sonae SGPS SA and CTT Correios de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CTT Correios de 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 CTT Correios. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CTT Correios de has no effect on the direction of Sonae SGPS i.e., Sonae SGPS and CTT Correios go up and down completely randomly.

Pair Corralation between Sonae SGPS and CTT Correios

Assuming the 90 days trading horizon Sonae SGPS is expected to generate 2.46 times less return on investment than CTT Correios. But when comparing it to its historical volatility, Sonae SGPS SA is 1.31 times less risky than CTT Correios. It trades about 0.23 of its potential returns per unit of risk. CTT Correios de is currently generating about 0.42 of returns per unit of risk over similar time horizon. If you would invest  523.00  in CTT Correios de on December 27, 2024 and sell it today you would earn a total of  235.00  from holding CTT Correios de or generate 44.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

Sonae SGPS SA  vs.  CTT Correios de

Sonae SGPS SA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sonae SGPS SA are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Sonae SGPS unveiled solid returns over the last few months and may actually be approaching a breakup point.

CTT Correios de

Risk-Adjusted Performance

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in CTT Correios de are ranked lower than 33 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, CTT Correios unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sonae SGPS and CTT Correios

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

The idea behind Sonae SGPS SA and CTT Correios 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.