Correlation Between Banco Comercial and REN Redes
Can any of the company-specific risk be diversified away by investing in both Banco Comercial and REN Redes 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 Banco Comercial and REN Redes into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Banco Comercial Portugues and REN Redes, you can compare the effects of market volatilities on Banco Comercial and REN Redes 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 Banco Comercial with a short position of REN Redes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Banco Comercial and REN Redes.
Diversification Opportunities for Banco Comercial and REN Redes
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Banco and REN is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Banco Comercial Portugues and REN Redes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on REN Redes and Banco Comercial 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 Banco Comercial Portugues are associated (or correlated) with REN Redes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of REN Redes has no effect on the direction of Banco Comercial i.e., Banco Comercial and REN Redes go up and down completely randomly.
Pair Corralation between Banco Comercial and REN Redes
Assuming the 90 days trading horizon Banco Comercial Portugues is expected to generate 3.3 times more return on investment than REN Redes. However, Banco Comercial is 3.3 times more volatile than REN Redes. It trades about 0.09 of its potential returns per unit of risk. REN Redes is currently generating about 0.02 per unit of risk. If you would invest 17.00 in Banco Comercial Portugues on August 31, 2024 and sell it today you would earn a total of 28.00 from holding Banco Comercial Portugues or generate 164.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Banco Comercial Portugues vs. REN Redes
Performance |
| Timeline |
| Banco Comercial Portugues |
| REN Redes |
Banco Comercial and REN Redes Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Banco Comercial and REN Redes
The main advantage of trading using opposite Banco Comercial and REN Redes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Banco Comercial position performs unexpectedly, REN Redes 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 REN Redes will offset losses from the drop in REN Redes' long position.| Banco Comercial vs. Sonae SGPS SA | Banco Comercial vs. Galp Energia SGPS | Banco Comercial vs. EDP Energias | Banco Comercial vs. Altri SGPS SA |
| REN Redes vs. Sonae SGPS SA | REN Redes vs. The Navigator | REN Redes vs. EDP Energias | REN Redes vs. NOS SGPS SA |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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