Correlation Between G6 Materials and Solvay SA

Can any of the company-specific risk be diversified away by investing in both G6 Materials 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 G6 Materials and Solvay SA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between G6 Materials Corp and Solvay SA, you can compare the effects of market volatilities on G6 Materials 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 G6 Materials with a short position of Solvay SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of G6 Materials and Solvay SA.

Diversification Opportunities for G6 Materials and Solvay SA

-0.37

Correlation Coefficient

G6 Materials  Solvay SA

Very good diversification

The 3 months correlation between GPHBF and Solvay is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding G6 Materials Corp and Solvay SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solvay SA and G6 Materials 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 G6 Materials Corp 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 G6 Materials i.e., G6 Materials and Solvay SA go up and down completely randomly.

Pair Corralation between G6 Materials and Solvay SA

Assuming the 90 days horizon G6 Materials Corp is expected to under-perform the Solvay SA. In addition to that, G6 Materials is 4.9 times more volatile than Solvay SA. It trades about -0.11 of its total potential returns per unit of risk. Solvay SA is currently generating about 0.08 per unit of volatility. If you would invest  3,090  in Solvay SA on December 2, 2024 and sell it today you would earn a total of  125.00  from holding Solvay SA or generate 4.05% return on investment over 90 days.

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

G6 Materials Corp  vs.  Solvay SA

G6 Materials Corp

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in G6 Materials Corp are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental drivers, G6 Materials reported solid returns over the last few months and may actually be approaching a breakup point.

Solvay SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Solvay SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Solvay SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with G6 Materials and Solvay SA

The main advantage of trading using opposite G6 Materials and Solvay SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if G6 Materials 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 G6 Materials Corp 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..