Correlation Between Sampo OYJ and Mapfre SA

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Can any of the company-specific risk be diversified away by investing in both Sampo OYJ and Mapfre SA 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 Sampo OYJ and Mapfre SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sampo OYJ and Mapfre SA ADR, you can compare the effects of market volatilities on Sampo OYJ and Mapfre SA 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 Sampo OYJ with a short position of Mapfre SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sampo OYJ and Mapfre SA.

Diversification Opportunities for Sampo OYJ and Mapfre SA

-0.27
  Correlation Coefficient

Very good diversification

The 3 months correlation between Sampo and Mapfre is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Sampo OYJ and Mapfre SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mapfre SA ADR and Sampo OYJ 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 Sampo OYJ are associated (or correlated) with Mapfre SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mapfre SA ADR has no effect on the direction of Sampo OYJ i.e., Sampo OYJ and Mapfre SA go up and down completely randomly.

Pair Corralation between Sampo OYJ and Mapfre SA

Assuming the 90 days horizon Sampo OYJ is expected to generate 0.26 times more return on investment than Mapfre SA. However, Sampo OYJ is 3.79 times less risky than Mapfre SA. It trades about -0.16 of its potential returns per unit of risk. Mapfre SA ADR is currently generating about -0.07 per unit of risk. If you would invest  2,122  in Sampo OYJ on September 19, 2024 and sell it today you would lose (75.00) from holding Sampo OYJ or give up 3.53% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Sampo OYJ  vs.  Mapfre SA ADR

 Performance 
       Timeline  
Sampo OYJ 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days Sampo OYJ has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.
Mapfre SA ADR 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Mapfre SA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Mapfre SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Sampo OYJ and Mapfre SA Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Sampo OYJ and Mapfre SA

The main advantage of trading using opposite Sampo OYJ and Mapfre SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sampo OYJ position performs unexpectedly, Mapfre SA 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 Mapfre SA will offset losses from the drop in Mapfre SA's long position.
The idea behind Sampo OYJ and Mapfre SA ADR 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.

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