Correlation Between Dovre Group and Solteq PLC

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

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

Diversification Opportunities for Dovre Group and Solteq PLC

-0.25

Correlation Coefficient

Dovre Group  Solteq PLC

Very good diversification

The 3 months correlation between Dovre and Solteq is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Dovre Group Plc and Solteq PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solteq PLC and Dovre Group 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 Dovre Group Plc are associated (or correlated) with Solteq PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solteq PLC has no effect on the direction of Dovre Group i.e., Dovre Group and Solteq PLC go up and down completely randomly.

Pair Corralation between Dovre Group and Solteq PLC

Assuming the 90 days trading horizon Dovre Group Plc is expected to generate 2.03 times more return on investment than Solteq PLC. However, Dovre Group is 2.03 times more volatile than Solteq PLC. It trades about 0.26 of its potential returns per unit of risk. Solteq PLC is currently generating about 0.08 per unit of risk. If you would invest  25.00  in Dovre Group Plc on October 24, 2024 and sell it today you would earn a total of  7.00  from holding Dovre Group Plc or generate 28.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.12%
Values	Daily Returns

Dovre Group Plc  vs.  Solteq PLC

Dovre Group Plc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dovre Group Plc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent technical indicators, Dovre Group may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Solteq PLC

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Solteq PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong essential indicators, Solteq PLC is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Dovre Group and Solteq PLC

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

The idea behind Dovre Group Plc and Solteq PLC 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.