Correlation Between National Grid and SPORT LISBOA
Can any of the company-specific risk be diversified away by investing in both National Grid 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 National Grid and SPORT LISBOA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between National Grid plc and SPORT LISBOA E, you can compare the effects of market volatilities on National Grid 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 National Grid with a short position of SPORT LISBOA. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Grid and SPORT LISBOA.
Diversification Opportunities for National Grid and SPORT LISBOA
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between National and SPORT is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding National Grid plc 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 National Grid 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 National Grid plc 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 National Grid i.e., National Grid and SPORT LISBOA go up and down completely randomly.
Pair Corralation between National Grid and SPORT LISBOA
Assuming the 90 days trading horizon National Grid plc is expected to under-perform the SPORT LISBOA. But the stock apears to be less risky and, when comparing its historical volatility, National Grid plc is 1.11 times less risky than SPORT LISBOA. The stock trades about -0.01 of its potential returns per unit of risk. The SPORT LISBOA E is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 306.00 in SPORT LISBOA E on September 13, 2024 and sell it today you would earn a total of 20.00 from holding SPORT LISBOA E or generate 6.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
National Grid plc vs. SPORT LISBOA E
Performance |
| Timeline |
| National Grid plc |
| SPORT LISBOA E |
National Grid and SPORT LISBOA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Grid and SPORT LISBOA
The main advantage of trading using opposite National Grid and SPORT LISBOA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Grid 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.| National Grid vs. LION ONE METALS | National Grid vs. Clean Energy Fuels | National Grid vs. HK Electric Investments | National Grid vs. Ultra Clean Holdings |
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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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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