Correlation Between Element Solutions and Sociedad Quimica

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

By analyzing existing cross correlation between Element Solutions and Sociedad Quimica y, you can compare the effects of market volatilities on Element Solutions and Sociedad Quimica 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 Element Solutions with a short position of Sociedad Quimica. Check out your portfolio center. Please also check ongoing floating volatility patterns of Element Solutions and Sociedad Quimica.

Diversification Opportunities for Element Solutions and Sociedad Quimica

0.05

Correlation Coefficient

Element Solutions  Sociedad Quimica

Significant diversification

The 3 months correlation between Element and Sociedad is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Element Solutions and Sociedad Quimica y in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sociedad Quimica y and Element Solutions 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 Element Solutions are associated (or correlated) with Sociedad Quimica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sociedad Quimica y has no effect on the direction of Element Solutions i.e., Element Solutions and Sociedad Quimica go up and down completely randomly.

Pair Corralation between Element Solutions and Sociedad Quimica

Considering the 90-day investment horizon Element Solutions is expected to under-perform the Sociedad Quimica. But the stock apears to be less risky and, when comparing its historical volatility, Element Solutions is 1.47 times less risky than Sociedad Quimica. The stock trades about -0.28 of its potential returns per unit of risk. The Sociedad Quimica y is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  4,004  in Sociedad Quimica y on October 11, 2024 and sell it today you would lose (100.00) from holding Sociedad Quimica y or give up 2.5% of portfolio value over 90 days.

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

Element Solutions  vs.  Sociedad Quimica y

Element Solutions

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Element Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Element Solutions is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Sociedad Quimica y

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sociedad Quimica y has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Element Solutions and Sociedad Quimica

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

The idea behind Element Solutions and Sociedad Quimica y 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.