Correlation Between Solocal Group and Innelec Multimedia

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

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

Diversification Opportunities for Solocal Group and Innelec Multimedia

-0.12

Correlation Coefficient

Solocal Group  Innelec Multimedia

Good diversification

The 3 months correlation between Solocal and Innelec is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Solocal Group SA and Innelec Multimedia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innelec Multimedia and Solocal 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 Solocal Group SA are associated (or correlated) with Innelec Multimedia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innelec Multimedia has no effect on the direction of Solocal Group i.e., Solocal Group and Innelec Multimedia go up and down completely randomly.

Pair Corralation between Solocal Group and Innelec Multimedia

Assuming the 90 days trading horizon Solocal Group SA is expected to generate 15.15 times more return on investment than Innelec Multimedia. However, Solocal Group is 15.15 times more volatile than Innelec Multimedia. It trades about 0.04 of its potential returns per unit of risk. Innelec Multimedia is currently generating about -0.03 per unit of risk. If you would invest  677.00  in Solocal Group SA on October 5, 2024 and sell it today you would lose (440.00) from holding Solocal Group SA or give up 64.99% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.68%
Values	Daily Returns

Solocal Group SA  vs.  Innelec Multimedia

Solocal Group SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Solocal Group SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Solocal Group is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Innelec Multimedia

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Innelec Multimedia are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Innelec Multimedia is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Solocal Group and Innelec Multimedia

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

The idea behind Solocal Group SA and Innelec Multimedia 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.