Correlation Between Solvay SA and E I
Can any of the company-specific risk be diversified away by investing in both Solvay SA and E I 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 Solvay SA and E I into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Solvay SA ADR and E I du, you can compare the effects of market volatilities on Solvay SA and E I 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 Solvay SA with a short position of E I. Check out your portfolio center. Please also check ongoing floating volatility patterns of Solvay SA and E I.
Diversification Opportunities for Solvay SA and E I
Poor diversification
The 3 months correlation between Solvay and CTA-PB is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Solvay SA ADR and E I du in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on E I du and Solvay SA 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 Solvay SA ADR are associated (or correlated) with E I. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of E I du has no effect on the direction of Solvay SA i.e., Solvay SA and E I go up and down completely randomly.
Pair Corralation between Solvay SA and E I
Assuming the 90 days horizon Solvay SA ADR is expected to under-perform the E I. In addition to that, Solvay SA is 2.69 times more volatile than E I du. It trades about -0.25 of its total potential returns per unit of risk. E I du is currently generating about -0.3 per unit of volatility. If you would invest 7,803 in E I du on September 1, 2024 and sell it today you would lose (506.00) from holding E I du or give up 6.48% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Solvay SA ADR vs. E I du
Performance |
| Timeline |
| Solvay SA ADR |
| E I du |
Solvay SA and E I Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Solvay SA and E I
The main advantage of trading using opposite Solvay SA and E I positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Solvay SA position performs unexpectedly, E I 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 E I will offset losses from the drop in E I's long position.| Solvay SA vs. Dow Inc | Solvay SA vs. Solvay SA | Solvay SA vs. Sumitomo Chemical Co | Solvay SA vs. Braskem SA Class |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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