Correlation Between Brederode and Solvay SA
Can any of the company-specific risk be diversified away by investing in both Brederode and Solvay SA 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 Brederode and Solvay SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Brederode SA and Solvay SA, you can compare the effects of market volatilities on Brederode and Solvay SA 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 Brederode with a short position of Solvay SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brederode and Solvay SA.
Diversification Opportunities for Brederode and Solvay SA
Excellent diversification
The 3 months correlation between Brederode and Solvay is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Brederode SA and Solvay SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solvay SA and Brederode 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 Brederode SA are associated (or correlated) with Solvay SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solvay SA has no effect on the direction of Brederode i.e., Brederode and Solvay SA go up and down completely randomly.
Pair Corralation between Brederode and Solvay SA
Assuming the 90 days trading horizon Brederode is expected to generate 3.18 times less return on investment than Solvay SA. But when comparing it to its historical volatility, Brederode SA is 1.83 times less risky than Solvay SA. It trades about 0.04 of its potential returns per unit of risk. Solvay SA is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 2,141 in Solvay SA on November 3, 2024 and sell it today you would earn a total of 813.00 from holding Solvay SA or generate 37.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Brederode SA vs. Solvay SA
Performance |
| Timeline |
| Brederode SA |
| Solvay SA |
Brederode and Solvay SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Brederode and Solvay SA
The main advantage of trading using opposite Brederode and Solvay SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brederode position performs unexpectedly, Solvay SA 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 Solvay SA will offset losses from the drop in Solvay SA's long position.| Brederode vs. Immolease Trust NV | Brederode vs. Retail Estates | Brederode vs. Onward Medical NV | Brederode vs. Vastned Retail Belgium |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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