Correlation Between Sonae SGPS and Semapa

Can any of the company-specific risk be diversified away by investing in both Sonae SGPS and Semapa 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 Semapa 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 Semapa, you can compare the effects of market volatilities on Sonae SGPS and Semapa 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 Semapa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sonae SGPS and Semapa.

Diversification Opportunities for Sonae SGPS and Semapa

0.83

Correlation Coefficient

Sonae SGPS  Semapa

Very poor diversification

The 3 months correlation between Sonae and Semapa is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Sonae SGPS SA and Semapa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Semapa 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 Semapa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Semapa has no effect on the direction of Sonae SGPS i.e., Sonae SGPS and Semapa go up and down completely randomly.

Pair Corralation between Sonae SGPS and Semapa

Assuming the 90 days trading horizon Sonae SGPS SA is expected to generate 1.26 times more return on investment than Semapa. However, Sonae SGPS is 1.26 times more volatile than Semapa. It trades about 0.3 of its potential returns per unit of risk. Semapa is currently generating about 0.35 per unit of risk. If you would invest  90.00  in Sonae SGPS SA on February 10, 2024 and sell it today you would earn a total of  7.00  from holding Sonae SGPS SA or generate 7.78% return on investment over 90 days.

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

Sonae SGPS SA  vs.  Semapa

Sonae SGPS SA

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sonae SGPS SA are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Sonae SGPS may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Semapa

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Semapa are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain primary indicators, Semapa unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sonae SGPS and Semapa

The main advantage of trading using opposite Sonae SGPS and Semapa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sonae SGPS position performs unexpectedly, Semapa 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 Semapa will offset losses from the drop in Semapa's long position.

The idea behind Sonae SGPS SA and Semapa 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.