Correlation Between Investor and Sofina Société

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

By analyzing existing cross correlation between Investor AB ser and Sofina Socit Anonyme, you can compare the effects of market volatilities on Investor and Sofina Société 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 Investor with a short position of Sofina Société. Check out your portfolio center. Please also check ongoing floating volatility patterns of Investor and Sofina Société.

Diversification Opportunities for Investor and Sofina Société

0.77

Correlation Coefficient

Investor  Sofina Société

Poor diversification

The 3 months correlation between Investor and Sofina is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Investor AB ser and Sofina Socit Anonyme in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sofina Socit Anonyme and Investor 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 Investor AB ser are associated (or correlated) with Sofina Société. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sofina Socit Anonyme has no effect on the direction of Investor i.e., Investor and Sofina Société go up and down completely randomly.

Pair Corralation between Investor and Sofina Société

Assuming the 90 days horizon Investor AB ser is expected to under-perform the Sofina Société. In addition to that, Investor is 152.16 times more volatile than Sofina Socit Anonyme. It trades about -0.24 of its total potential returns per unit of risk. Sofina Socit Anonyme is currently generating about 0.22 per unit of volatility. If you would invest  22,890  in Sofina Socit Anonyme on October 5, 2024 and sell it today you would earn a total of  10.00  from holding Sofina Socit Anonyme or generate 0.04% return on investment over 90 days.

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

Investor AB ser  vs.  Sofina Socit Anonyme

Investor AB ser

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Investor AB ser has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's fundamental drivers remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Sofina Socit Anonyme

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Investor and Sofina Société

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

The idea behind Investor AB ser and Sofina Socit Anonyme 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 Transaction History module to view history of all your transactions and understand their impact on performance.