Correlation Between Inapa Inv and Sonae SGPS

Can any of the company-specific risk be diversified away by investing in both Inapa Inv 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 Inapa Inv and Sonae SGPS into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Inapa Inv and Sonae SGPS SA, you can compare the effects of market volatilities on Inapa Inv 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 Inapa Inv with a short position of Sonae SGPS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Inapa Inv and Sonae SGPS.

Diversification Opportunities for Inapa Inv and Sonae SGPS

0.47

Correlation Coefficient

Inapa Inv  Sonae SGPS

Very weak diversification

The 3 months correlation between Inapa and Sonae is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Inapa Inv 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 Inapa Inv 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 Inapa Inv 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 Inapa Inv i.e., Inapa Inv and Sonae SGPS go up and down completely randomly.

Pair Corralation between Inapa Inv and Sonae SGPS

Assuming the 90 days trading horizon Inapa Inv is expected to generate 1.67 times more return on investment than Sonae SGPS. However, Inapa Inv is 1.67 times more volatile than Sonae SGPS SA. It trades about 0.09 of its potential returns per unit of risk. Sonae SGPS SA is currently generating about 0.1 per unit of risk. If you would invest  3.28  in Inapa Inv on January 19, 2024 and sell it today you would earn a total of  0.10  from holding Inapa Inv or generate 3.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Inapa Inv  vs.  Sonae SGPS SA

Inapa Inv

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Inapa Inv has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in May 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Sonae SGPS SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sonae SGPS SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Sonae SGPS is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Inapa Inv and Sonae SGPS

The main advantage of trading using opposite Inapa Inv and Sonae SGPS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Inapa Inv 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.

The idea behind Inapa Inv and Sonae SGPS SA 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.