Correlation Between Sonae SGPS and Banco Comercial
Can any of the company-specific risk be diversified away by investing in both Sonae SGPS and Banco Comercial 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 Sonae SGPS and Banco Comercial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sonae SGPS SA and Banco Comercial Portugues, you can compare the effects of market volatilities on Sonae SGPS and Banco Comercial 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 Sonae SGPS with a short position of Banco Comercial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sonae SGPS and Banco Comercial.
Diversification Opportunities for Sonae SGPS and Banco Comercial
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Sonae and Banco is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Sonae SGPS SA and Banco Comercial Portugues in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banco Comercial Portugues and Sonae SGPS 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 Sonae SGPS SA are associated (or correlated) with Banco Comercial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banco Comercial Portugues has no effect on the direction of Sonae SGPS i.e., Sonae SGPS and Banco Comercial go up and down completely randomly.
Pair Corralation between Sonae SGPS and Banco Comercial
Assuming the 90 days trading horizon Sonae SGPS is expected to generate 2.31 times less return on investment than Banco Comercial. But when comparing it to its historical volatility, Sonae SGPS SA is 2.47 times less risky than Banco Comercial. It trades about 0.1 of its potential returns per unit of risk. Banco Comercial Portugues is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 42.00 in Banco Comercial Portugues on August 25, 2024 and sell it today you would earn a total of 2.00 from holding Banco Comercial Portugues or generate 4.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sonae SGPS SA vs. Banco Comercial Portugues
Performance |
| Timeline |
| Sonae SGPS SA |
| Banco Comercial Portugues |
Sonae SGPS and Banco Comercial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sonae SGPS and Banco Comercial
The main advantage of trading using opposite Sonae SGPS and Banco Comercial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sonae SGPS position performs unexpectedly, Banco Comercial 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 Banco Comercial will offset losses from the drop in Banco Comercial's long position.| Sonae SGPS vs. Banco Comercial Portugues | Sonae SGPS vs. NOS SGPS SA | Sonae SGPS vs. The Navigator | Sonae SGPS vs. Altri SGPS SA |
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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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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