Correlation Between UCB SA and Solvay SA
Can any of the company-specific risk be diversified away by investing in both UCB SA 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 UCB SA and Solvay SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between UCB SA and Solvay SA, you can compare the effects of market volatilities on UCB SA 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 UCB SA with a short position of Solvay SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of UCB SA and Solvay SA.
Diversification Opportunities for UCB SA and Solvay SA
Very good diversification
The 3 months correlation between UCB and Solvay is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding UCB SA and Solvay SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solvay SA and UCB 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 UCB SA 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 UCB SA i.e., UCB SA and Solvay SA go up and down completely randomly.
Pair Corralation between UCB SA and Solvay SA
Assuming the 90 days trading horizon UCB SA is expected to under-perform the Solvay SA. In addition to that, UCB SA is 1.09 times more volatile than Solvay SA. It trades about -0.04 of its total potential returns per unit of risk. Solvay SA is currently generating about -0.04 per unit of volatility. If you would invest 2,994 in Solvay SA on November 4, 2024 and sell it today you would lose (40.00) from holding Solvay SA or give up 1.34% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
UCB SA vs. Solvay SA
Performance |
| Timeline |
| UCB SA |
| Solvay SA |
UCB SA and Solvay SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with UCB SA and Solvay SA
The main advantage of trading using opposite UCB SA and Solvay SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UCB SA 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.The idea behind UCB SA and Solvay 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.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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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