Correlation Between Sonae SGPS and Mota Engil

Can any of the company-specific risk be diversified away by investing in both Sonae SGPS 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 Sonae SGPS and Mota Engil 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 Mota Engil SGPS SA, you can compare the effects of market volatilities on Sonae SGPS 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 Sonae SGPS with a short position of Mota Engil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sonae SGPS and Mota Engil.

Diversification Opportunities for Sonae SGPS and Mota Engil

0.03

Correlation Coefficient

Sonae SGPS  Mota Engil

Significant diversification

The 3 months correlation between Sonae and Mota is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Sonae SGPS SA 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 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 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 Sonae SGPS i.e., Sonae SGPS and Mota Engil go up and down completely randomly.

Pair Corralation between Sonae SGPS and Mota Engil

Assuming the 90 days trading horizon Sonae SGPS is expected to generate 4.82 times less return on investment than Mota Engil. But when comparing it to its historical volatility, Sonae SGPS SA is 3.63 times less risky than Mota Engil. It trades about 0.07 of its potential returns per unit of risk. Mota Engil SGPS SA is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  258.00  in Mota Engil SGPS SA on November 28, 2024 and sell it today you would earn a total of  37.00  from holding Mota Engil SGPS SA or generate 14.34% return on investment over 90 days.

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

Sonae SGPS SA  vs.  Mota Engil SGPS SA

Sonae SGPS SA

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sonae SGPS SA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. 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.

Mota Engil SGPS

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mota Engil SGPS SA are ranked lower than 7 (%) 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 Sonae SGPS and Mota Engil

The main advantage of trading using opposite Sonae SGPS and Mota Engil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sonae SGPS 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 Sonae SGPS SA 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.