Correlation Between SPORT LISBOA and CHAMPION IRON

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

By analyzing existing cross correlation between SPORT LISBOA E and CHAMPION IRON, you can compare the effects of market volatilities on SPORT LISBOA and CHAMPION IRON 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 SPORT LISBOA with a short position of CHAMPION IRON. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPORT LISBOA and CHAMPION IRON.

Diversification Opportunities for SPORT LISBOA and CHAMPION IRON

-0.09

Correlation Coefficient

SPORT LISBOA  CHAMPION IRON

Good diversification

The 3 months correlation between SPORT and CHAMPION is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding SPORT LISBOA E and CHAMPION IRON in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHAMPION IRON and SPORT LISBOA 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 SPORT LISBOA E are associated (or correlated) with CHAMPION IRON. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHAMPION IRON has no effect on the direction of SPORT LISBOA i.e., SPORT LISBOA and CHAMPION IRON go up and down completely randomly.

Pair Corralation between SPORT LISBOA and CHAMPION IRON

Assuming the 90 days horizon SPORT LISBOA E is expected to generate 1.54 times more return on investment than CHAMPION IRON. However, SPORT LISBOA is 1.54 times more volatile than CHAMPION IRON. It trades about 0.17 of its potential returns per unit of risk. CHAMPION IRON is currently generating about 0.09 per unit of risk. If you would invest  371.00  in SPORT LISBOA E on April 23, 2025 and sell it today you would earn a total of  173.00  from holding SPORT LISBOA E or generate 46.63% return on investment over 90 days.

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

SPORT LISBOA E  vs.  CHAMPION IRON

SPORT LISBOA E

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SPORT LISBOA E are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, SPORT LISBOA reported solid returns over the last few months and may actually be approaching a breakup point.

CHAMPION IRON

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CHAMPION IRON are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CHAMPION IRON reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SPORT LISBOA and CHAMPION IRON

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

The idea behind SPORT LISBOA E and CHAMPION IRON 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.