Correlation Between Sonae SGPS and Benfica

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

Diversification Opportunities for Sonae SGPS and Benfica

0.47

Correlation Coefficient

Sonae SGPS  Benfica

Very weak diversification

The 3 months correlation between Sonae and Benfica is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Sonae SGPS SA and Benfica in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Benfica 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 Benfica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Benfica has no effect on the direction of Sonae SGPS i.e., Sonae SGPS and Benfica go up and down completely randomly.

Pair Corralation between Sonae SGPS and Benfica

Assuming the 90 days trading horizon Sonae SGPS SA is expected to under-perform the Benfica. But the stock apears to be less risky and, when comparing its historical volatility, Sonae SGPS SA is 4.21 times less risky than Benfica. The stock trades about -0.12 of its potential returns per unit of risk. The Benfica is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  337.00  in Benfica on September 16, 2024 and sell it today you would lose (10.00) from holding Benfica or give up 2.97% of portfolio value over 90 days.

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

Sonae SGPS SA  vs.  Benfica

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.

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.

Pair Trading with Sonae SGPS and Benfica

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

The idea behind Sonae SGPS SA and Benfica 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.