Correlation Between REN Redes and Sonae SGPS
Can any of the company-specific risk be diversified away by investing in both REN Redes and Sonae SGPS 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 REN Redes and Sonae SGPS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between REN Redes and Sonae SGPS SA, you can compare the effects of market volatilities on REN Redes and Sonae SGPS 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 REN Redes with a short position of Sonae SGPS. Check out your portfolio center. Please also check ongoing floating volatility patterns of REN Redes and Sonae SGPS.
Diversification Opportunities for REN Redes and Sonae SGPS
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between REN and Sonae is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding REN Redes and Sonae SGPS SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sonae SGPS SA and REN Redes 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 REN Redes are associated (or correlated) with Sonae SGPS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sonae SGPS SA has no effect on the direction of REN Redes i.e., REN Redes and Sonae SGPS go up and down completely randomly.
Pair Corralation between REN Redes and Sonae SGPS
Assuming the 90 days trading horizon REN Redes is expected to generate 1.26 times less return on investment than Sonae SGPS. But when comparing it to its historical volatility, REN Redes is 1.24 times less risky than Sonae SGPS. It trades about 0.03 of its potential returns per unit of risk. Sonae SGPS SA is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 87.00 in Sonae SGPS SA on August 25, 2024 and sell it today you would earn a total of 6.00 from holding Sonae SGPS SA or generate 6.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
REN Redes vs. Sonae SGPS SA
Performance |
| Timeline |
| REN Redes |
| Sonae SGPS SA |
REN Redes and Sonae SGPS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with REN Redes and Sonae SGPS
The main advantage of trading using opposite REN Redes and Sonae SGPS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if REN Redes position performs unexpectedly, Sonae SGPS 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 Sonae SGPS will offset losses from the drop in Sonae SGPS's long position.| REN Redes vs. Sonae SGPS SA | REN Redes vs. The Navigator | REN Redes vs. EDP Energias | REN Redes vs. NOS SGPS SA |
| Sonae SGPS vs. Banco Comercial Portugues | Sonae SGPS vs. NOS SGPS SA | Sonae SGPS vs. The Navigator | Sonae SGPS vs. Altri 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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