Correlation Between Sonda SA and Empresa Nacional

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

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

Diversification Opportunities for Sonda SA and Empresa Nacional

0.7

Correlation Coefficient

Sonda SA  Empresa Nacional

Poor diversification

The 3 months correlation between Sonda and Empresa is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Sonda SA and Empresa Nacional de in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Empresa Nacional and Sonda SA 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 Sonda SA are associated (or correlated) with Empresa Nacional. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Empresa Nacional has no effect on the direction of Sonda SA i.e., Sonda SA and Empresa Nacional go up and down completely randomly.

Pair Corralation between Sonda SA and Empresa Nacional

Assuming the 90 days trading horizon Sonda SA is expected to generate 0.88 times more return on investment than Empresa Nacional. However, Sonda SA is 1.14 times less risky than Empresa Nacional. It trades about 0.17 of its potential returns per unit of risk. Empresa Nacional de is currently generating about -0.07 per unit of risk. If you would invest  38,263  in Sonda SA on December 5, 2024 and sell it today you would earn a total of  1,741  from holding Sonda SA or generate 4.55% return on investment over 90 days.

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

Sonda SA  vs.  Empresa Nacional de

Sonda SA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sonda SA are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Sonda SA unveiled solid returns over the last few months and may actually be approaching a breakup point.

Empresa Nacional

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Empresa Nacional de are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Empresa Nacional 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 Sonda SA and Empresa Nacional

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

The idea behind Sonda SA and Empresa Nacional 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.