Correlation Between Big 5 and SPORT LISBOA
Can any of the company-specific risk be diversified away by investing in both Big 5 and SPORT LISBOA 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 Big 5 and SPORT LISBOA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Big 5 Sporting and SPORT LISBOA E, you can compare the effects of market volatilities on Big 5 and SPORT LISBOA 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 Big 5 with a short position of SPORT LISBOA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Big 5 and SPORT LISBOA.
Diversification Opportunities for Big 5 and SPORT LISBOA
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Big and SPORT is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Big 5 Sporting and SPORT LISBOA E in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPORT LISBOA E and Big 5 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 Big 5 Sporting are associated (or correlated) with SPORT LISBOA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPORT LISBOA E has no effect on the direction of Big 5 i.e., Big 5 and SPORT LISBOA go up and down completely randomly.
Pair Corralation between Big 5 and SPORT LISBOA
Assuming the 90 days horizon Big 5 Sporting is expected to under-perform the SPORT LISBOA. In addition to that, Big 5 is 3.68 times more volatile than SPORT LISBOA E. It trades about -0.08 of its total potential returns per unit of risk. SPORT LISBOA E is currently generating about 0.09 per unit of volatility. If you would invest 314.00 in SPORT LISBOA E on August 28, 2024 and sell it today you would earn a total of 7.00 from holding SPORT LISBOA E or generate 2.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Big 5 Sporting vs. SPORT LISBOA E
Performance |
| Timeline |
| Big 5 Sporting |
| SPORT LISBOA E |
Big 5 and SPORT LISBOA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Big 5 and SPORT LISBOA
The main advantage of trading using opposite Big 5 and SPORT LISBOA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Big 5 position performs unexpectedly, SPORT LISBOA 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 SPORT LISBOA will offset losses from the drop in SPORT LISBOA's long position.The idea behind Big 5 Sporting and SPORT LISBOA E 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.| SPORT LISBOA vs. The Walt Disney | SPORT LISBOA vs. Superior Plus Corp | SPORT LISBOA vs. NMI Holdings | SPORT LISBOA vs. Origin Agritech |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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