Correlation Between Onward Medical and Solvay SA
Can any of the company-specific risk be diversified away by investing in both Onward Medical 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 Onward Medical and Solvay SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Onward Medical NV and Solvay SA, you can compare the effects of market volatilities on Onward Medical 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 Onward Medical with a short position of Solvay SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Onward Medical and Solvay SA.
Diversification Opportunities for Onward Medical and Solvay SA
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Onward and Solvay is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Onward Medical NV and Solvay SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solvay SA and Onward Medical 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 Onward Medical NV 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 Onward Medical i.e., Onward Medical and Solvay SA go up and down completely randomly.
Pair Corralation between Onward Medical and Solvay SA
Assuming the 90 days trading horizon Onward Medical is expected to generate 3.05 times less return on investment than Solvay SA. In addition to that, Onward Medical is 2.4 times more volatile than Solvay SA. It trades about 0.01 of its total potential returns per unit of risk. Solvay SA is currently generating about 0.09 per unit of volatility. If you would invest 1,409 in Solvay SA on August 30, 2024 and sell it today you would earn a total of 1,821 from holding Solvay SA or generate 129.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Onward Medical NV vs. Solvay SA
Performance |
| Timeline |
| Onward Medical NV |
| Solvay SA |
Onward Medical and Solvay SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Onward Medical and Solvay SA
The main advantage of trading using opposite Onward Medical and Solvay SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Onward Medical 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.| Onward Medical vs. Biocartis Group NV | Onward Medical vs. Celyad SA | Onward Medical vs. Argen X | Onward Medical vs. Exmar NV |
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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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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