Correlation Between Solocal Group and Prodways Group

Can any of the company-specific risk be diversified away by investing in both Solocal Group and Prodways Group 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 Prodways Group 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 Prodways Group SA, you can compare the effects of market volatilities on Solocal Group and Prodways Group 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 Prodways Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Solocal Group and Prodways Group.

Diversification Opportunities for Solocal Group and Prodways Group

0.28

Correlation Coefficient

Solocal Group  Prodways Group

Modest diversification

The 3 months correlation between Solocal and Prodways is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Solocal Group SA and Prodways Group SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prodways Group SA 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 Prodways Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prodways Group SA has no effect on the direction of Solocal Group i.e., Solocal Group and Prodways Group go up and down completely randomly.

Pair Corralation between Solocal Group and Prodways Group

Assuming the 90 days trading horizon Solocal Group SA is expected to generate 1.66 times more return on investment than Prodways Group. However, Solocal Group is 1.66 times more volatile than Prodways Group SA. It trades about 0.02 of its potential returns per unit of risk. Prodways Group SA is currently generating about -0.09 per unit of risk. If you would invest  280.00  in Solocal Group SA on September 4, 2024 and sell it today you would lose (1.00) from holding Solocal Group SA or give up 0.36% of portfolio value over 90 days.

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

Solocal Group SA  vs.  Prodways Group SA

Solocal Group SA

Risk-Adjusted Performance

1 of 100

Weak

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

Prodways Group SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prodways Group SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Solocal Group and Prodways Group

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

The idea behind Solocal Group SA and Prodways Group 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.