Correlation Between Neovacs SA and Solocal Group

Can any of the company-specific risk be diversified away by investing in both Neovacs SA and Solocal Group 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 Neovacs SA and Solocal Group into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Neovacs SA and Solocal Group SA, you can compare the effects of market volatilities on Neovacs SA and Solocal Group 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 Neovacs SA with a short position of Solocal Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Neovacs SA and Solocal Group.

Diversification Opportunities for Neovacs SA and Solocal Group

0.52

Correlation Coefficient

Neovacs SA  Solocal Group

Very weak diversification

The 3 months correlation between Neovacs and Solocal is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Neovacs SA and Solocal Group SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solocal Group SA and Neovacs 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 Neovacs SA are associated (or correlated) with Solocal Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solocal Group SA has no effect on the direction of Neovacs SA i.e., Neovacs SA and Solocal Group go up and down completely randomly.

Pair Corralation between Neovacs SA and Solocal Group

Assuming the 90 days trading horizon Neovacs SA is expected to generate 6.4 times more return on investment than Solocal Group. However, Neovacs SA is 6.4 times more volatile than Solocal Group SA. It trades about 0.06 of its potential returns per unit of risk. Solocal Group SA is currently generating about -0.03 per unit of risk. If you would invest  700.00  in Neovacs SA on September 7, 2024 and sell it today you would lose (400.00) from holding Neovacs SA or give up 57.14% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Neovacs SA  vs.  Solocal Group SA

Neovacs SA

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Neovacs SA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Neovacs SA reported solid returns over the last few months and may actually be approaching a breakup point.

Solocal Group SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Solocal Group SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Neovacs SA and Solocal Group

The main advantage of trading using opposite Neovacs SA and Solocal Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Neovacs SA position performs unexpectedly, Solocal Group 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 Solocal Group will offset losses from the drop in Solocal Group's long position.

The idea behind Neovacs SA and Solocal Group 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.

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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.