Correlation Between Compagnie and Solvay SA
Can any of the company-specific risk be diversified away by investing in both Compagnie 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 Compagnie and Solvay SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Compagnie du Bois and Solvay SA, you can compare the effects of market volatilities on Compagnie 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 Compagnie with a short position of Solvay SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compagnie and Solvay SA.
Diversification Opportunities for Compagnie and Solvay SA
Good diversification
The 3 months correlation between Compagnie and Solvay is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Compagnie du Bois and Solvay SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solvay SA and Compagnie 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 Compagnie du Bois 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 Compagnie i.e., Compagnie and Solvay SA go up and down completely randomly.
Pair Corralation between Compagnie and Solvay SA
Assuming the 90 days trading horizon Compagnie du Bois is expected to generate 0.78 times more return on investment than Solvay SA. However, Compagnie du Bois is 1.29 times less risky than Solvay SA. It trades about -0.17 of its potential returns per unit of risk. Solvay SA is currently generating about -0.4 per unit of risk. If you would invest 23,700 in Compagnie du Bois on August 27, 2024 and sell it today you would lose (1,600) from holding Compagnie du Bois or give up 6.75% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Compagnie du Bois vs. Solvay SA
Performance |
| Timeline |
| Compagnie du Bois |
| Solvay SA |
Compagnie and Solvay SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Compagnie and Solvay SA
The main advantage of trading using opposite Compagnie and Solvay SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compagnie 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.| Compagnie vs. Groep Brussel Lambert | Compagnie vs. Sofina Socit Anonyme | Compagnie vs. Ackermans Van Haaren | Compagnie vs. KBC Ancora |
| Solvay SA vs. Retail Estates | Solvay SA vs. Vastned Retail Belgium | Solvay SA vs. Home Invest Belgium | Solvay SA vs. Onward Medical NV |
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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