Correlation Between Celanese and Solvay SA

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

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

Diversification Opportunities for Celanese and Solvay SA

-0.68

Correlation Coefficient

Celanese  Solvay SA

Excellent diversification

The 3 months correlation between Celanese and Solvay is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Celanese and Solvay SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solvay SA ADR and Celanese 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 Celanese 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 ADR has no effect on the direction of Celanese i.e., Celanese and Solvay SA go up and down completely randomly.

Pair Corralation between Celanese and Solvay SA

Allowing for the 90-day total investment horizon Celanese is expected to under-perform the Solvay SA. In addition to that, Celanese is 1.66 times more volatile than Solvay SA ADR. It trades about -0.06 of its total potential returns per unit of risk. Solvay SA ADR is currently generating about 0.12 per unit of volatility. If you would invest  307.00  in Solvay SA ADR on December 21, 2024 and sell it today you would earn a total of  52.00  from holding Solvay SA ADR or generate 16.94% return on investment over 90 days.

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

Celanese  vs.  Solvay SA ADR

Celanese

Risk-Adjusted Performance

Very Weak

Over the last 90 days Celanese has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Solvay SA ADR

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Solvay SA ADR are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Solvay SA showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Celanese and Solvay SA

The main advantage of trading using opposite Celanese and Solvay SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Celanese 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 Celanese and Solvay SA ADR 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.