Correlation Between Brederode and Sofina Socit

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

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

Diversification Opportunities for Brederode and Sofina Socit

0.95

Correlation Coefficient

Brederode  Sofina Socit

Almost no diversification

The 3 months correlation between Brederode and Sofina is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Brederode SA and Sofina Socit Anonyme in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sofina Socit Anonyme and Brederode 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 Brederode SA are associated (or correlated) with Sofina Socit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sofina Socit Anonyme has no effect on the direction of Brederode i.e., Brederode and Sofina Socit go up and down completely randomly.

Pair Corralation between Brederode and Sofina Socit

Assuming the 90 days trading horizon Brederode SA is expected to generate 0.98 times more return on investment than Sofina Socit. However, Brederode SA is 1.02 times less risky than Sofina Socit. It trades about -0.11 of its potential returns per unit of risk. Sofina Socit Anonyme is currently generating about -0.25 per unit of risk. If you would invest  11,460  in Brederode SA on September 15, 2024 and sell it today you would lose (820.00) from holding Brederode SA or give up 7.16% of portfolio value over 90 days.

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

Brederode SA  vs.  Sofina Socit Anonyme

Brederode SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brederode 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.

Sofina Socit Anonyme

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sofina Socit Anonyme has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's technical and fundamental indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Brederode and Sofina Socit

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

The idea behind Brederode SA and Sofina Socit Anonyme 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.