Correlation Between Sporting Clube and Benfica

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

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

Diversification Opportunities for Sporting Clube and Benfica

0.29

Correlation Coefficient

Sporting Clube  Benfica

Modest diversification

The 3 months correlation between Sporting and Benfica is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Sporting Clube de and Benfica in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Benfica and Sporting Clube 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 Sporting Clube de are associated (or correlated) with Benfica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Benfica has no effect on the direction of Sporting Clube i.e., Sporting Clube and Benfica go up and down completely randomly.

Pair Corralation between Sporting Clube and Benfica

Assuming the 90 days trading horizon Sporting Clube is expected to generate 9.28 times less return on investment than Benfica. But when comparing it to its historical volatility, Sporting Clube de is 4.53 times less risky than Benfica. It trades about 0.1 of its potential returns per unit of risk. Benfica is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  364.00  in Benfica on April 24, 2025 and sell it today you would earn a total of  196.00  from holding Benfica or generate 53.85% return on investment over 90 days.

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

Sporting Clube de  vs.  Benfica

Sporting Clube de

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sporting Clube de are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental drivers, Sporting Clube is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Benfica

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Benfica are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain essential indicators, Benfica disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sporting Clube and Benfica

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

The idea behind Sporting Clube de and Benfica 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.

Check out your portfolio center.

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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.