Correlation Between Solutions and Munic SA
Can any of the company-specific risk be diversified away by investing in both Solutions and Munic 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 Solutions and Munic SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Solutions 30 SE and Munic SA, you can compare the effects of market volatilities on Solutions and Munic 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 Solutions with a short position of Munic SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Solutions and Munic SA.
Diversification Opportunities for Solutions and Munic SA
Pay attention - limited upside
The 3 months correlation between Solutions and Munic is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Solutions 30 SE and Munic SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Munic SA and Solutions 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 Solutions 30 SE are associated (or correlated) with Munic SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Munic SA has no effect on the direction of Solutions i.e., Solutions and Munic SA go up and down completely randomly.
Pair Corralation between Solutions and Munic SA
Assuming the 90 days trading horizon Solutions 30 SE is expected to under-perform the Munic SA. But the stock apears to be less risky and, when comparing its historical volatility, Solutions 30 SE is 2.41 times less risky than Munic SA. The stock trades about -0.49 of its potential returns per unit of risk. The Munic SA is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 91.00 in Munic SA on September 2, 2024 and sell it today you would earn a total of 1.00 from holding Munic SA or generate 1.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Solutions 30 SE vs. Munic SA
Performance |
| Timeline |
| Solutions 30 SE |
| Munic SA |
Solutions and Munic SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Solutions and Munic SA
The main advantage of trading using opposite Solutions and Munic SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Solutions position performs unexpectedly, Munic 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 Munic SA will offset losses from the drop in Munic SA's long position.| Solutions vs. LVMH Mot Hennessy | Solutions vs. LOreal SA | Solutions vs. Hermes International SCA | Solutions vs. Manitou BF SA |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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