Correlation Between Solvay SA and Brederode
Can any of the company-specific risk be diversified away by investing in both Solvay SA and Brederode 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 Brederode into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Solvay SA and Brederode SA, you can compare the effects of market volatilities on Solvay SA and Brederode 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 Brederode. Check out your portfolio center. Please also check ongoing floating volatility patterns of Solvay SA and Brederode.
Diversification Opportunities for Solvay SA and Brederode
Excellent diversification
The 3 months correlation between Solvay and Brederode is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Solvay SA and Brederode SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brederode SA 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 are associated (or correlated) with Brederode. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brederode SA has no effect on the direction of Solvay SA i.e., Solvay SA and Brederode go up and down completely randomly.
Pair Corralation between Solvay SA and Brederode
Assuming the 90 days trading horizon Solvay SA is expected to generate 1.83 times more return on investment than Brederode. However, Solvay SA is 1.83 times more volatile than Brederode SA. It trades about 0.07 of its potential returns per unit of risk. Brederode SA is currently generating about 0.04 per unit of risk. 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 |
Solvay SA vs. Brederode SA
Performance |
| Timeline |
| Solvay SA |
| Brederode SA |
Solvay SA and Brederode Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Solvay SA and Brederode
The main advantage of trading using opposite Solvay SA and Brederode positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Solvay SA position performs unexpectedly, Brederode 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 Brederode will offset losses from the drop in Brederode's long position.The idea behind Solvay SA and Brederode SA pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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