Correlation Between Grand River and Solvay Bank

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

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

Diversification Opportunities for Grand River and Solvay Bank

-0.1

Correlation Coefficient

Grand River  Solvay Bank

Good diversification

The 3 months correlation between Grand and Solvay is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Grand River Commerce and Solvay Bank Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solvay Bank Corp and Grand River 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 Grand River Commerce are associated (or correlated) with Solvay Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solvay Bank Corp has no effect on the direction of Grand River i.e., Grand River and Solvay Bank go up and down completely randomly.

Pair Corralation between Grand River and Solvay Bank

Given the investment horizon of 90 days Grand River Commerce is expected to generate 1.09 times more return on investment than Solvay Bank. However, Grand River is 1.09 times more volatile than Solvay Bank Corp. It trades about 0.17 of its potential returns per unit of risk. Solvay Bank Corp is currently generating about 0.02 per unit of risk. If you would invest  305.00  in Grand River Commerce on October 20, 2024 and sell it today you would earn a total of  25.00  from holding Grand River Commerce or generate 8.2% return on investment over 90 days.

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

Grand River Commerce  vs.  Solvay Bank Corp

Grand River Commerce

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Grand River Commerce are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Grand River showed solid returns over the last few months and may actually be approaching a breakup point.

Solvay Bank Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Solvay Bank Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's fundamental drivers remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Grand River and Solvay Bank

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

The idea behind Grand River Commerce and Solvay Bank Corp 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.