Correlation Between Semapa and Sonae SGPS

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

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

Diversification Opportunities for Semapa and Sonae SGPS

0.48

Correlation Coefficient

Semapa  Sonae SGPS

Very weak diversification

The 3 months correlation between Semapa and Sonae is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Semapa 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 Semapa 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 Semapa 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 Semapa i.e., Semapa and Sonae SGPS go up and down completely randomly.

Pair Corralation between Semapa and Sonae SGPS

Assuming the 90 days trading horizon Semapa is expected to generate 1.0 times more return on investment than Sonae SGPS. However, Semapa is 1.0 times less risky than Sonae SGPS. It trades about 0.34 of its potential returns per unit of risk. Sonae SGPS SA is currently generating about 0.16 per unit of risk. If you would invest  1,418  in Semapa on January 21, 2024 and sell it today you would earn a total of  108.00  from holding Semapa or generate 7.62% return on investment over 90 days.

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

Semapa  vs.  Sonae SGPS SA

Semapa

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Semapa are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain primary indicators, Semapa may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Sonae SGPS SA

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sonae SGPS SA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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 Semapa and Sonae SGPS

The main advantage of trading using opposite Semapa and Sonae SGPS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Semapa 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 Semapa 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.