Correlation Between Jeronimo Martins and Sonae SGPS

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

Diversification Opportunities for Jeronimo Martins and Sonae SGPS

0.3
  Correlation Coefficient

Weak diversification

The 3 months correlation between Jeronimo and Sonae is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Jeronimo Martins SGPS 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 Jeronimo Martins 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 Jeronimo Martins SGPS 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 Jeronimo Martins i.e., Jeronimo Martins and Sonae SGPS go up and down completely randomly.

Pair Corralation between Jeronimo Martins and Sonae SGPS

Assuming the 90 days trading horizon Jeronimo Martins SGPS is expected to under-perform the Sonae SGPS. In addition to that, Jeronimo Martins is 1.52 times more volatile than Sonae SGPS SA. It trades about -0.48 of its total potential returns per unit of risk. Sonae SGPS SA is currently generating about 0.09 per unit of volatility. If you would invest  86.00  in Sonae SGPS SA on December 30, 2023 and sell it today you would earn a total of  2.00  from holding Sonae SGPS SA or generate 2.33% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Jeronimo Martins SGPS  vs.  Sonae SGPS SA

 Performance 
       Timeline  
Jeronimo Martins SGPS 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Jeronimo Martins SGPS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 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

 
Low
 
High
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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

Jeronimo Martins and Sonae SGPS Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Jeronimo Martins and Sonae SGPS

The main advantage of trading using opposite Jeronimo Martins and Sonae SGPS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Jeronimo Martins 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 Jeronimo Martins SGPS 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.

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