Correlation Between E I and Solvay SA

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

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

Diversification Opportunities for E I and Solvay SA

0.36

Correlation Coefficient

E I  Solvay SA

Weak diversification

The 3 months correlation between CTA-PB and Solvay is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding E I du and Solvay SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solvay SA and E I 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 E I du 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 E I i.e., E I and Solvay SA go up and down completely randomly.

Pair Corralation between E I and Solvay SA

Assuming the 90 days trading horizon E I is expected to generate 3.07 times less return on investment than Solvay SA. But when comparing it to its historical volatility, E I du is 3.52 times less risky than Solvay SA. It trades about 0.1 of its potential returns per unit of risk. Solvay SA is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  3,139  in Solvay SA on December 30, 2024 and sell it today you would earn a total of  421.00  from holding Solvay SA or generate 13.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.77%
Values	Daily Returns

E I du  vs.  Solvay SA

E I du

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in E I du are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, E I is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Solvay SA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Solvay SA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Solvay SA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with E I and Solvay SA

The main advantage of trading using opposite E I and Solvay SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if E I 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 E I du 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.

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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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.