Correlation Between Lsb Industries and Solvay SA

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

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

Diversification Opportunities for Lsb Industries and Solvay SA

0.39

Correlation Coefficient

Lsb Industries  Solvay SA

Weak diversification

The 3 months correlation between Lsb and Solvay is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Lsb Industries and Solvay SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solvay SA and Lsb Industries 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 Lsb Industries 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 Lsb Industries i.e., Lsb Industries and Solvay SA go up and down completely randomly.

Pair Corralation between Lsb Industries and Solvay SA

Considering the 90-day investment horizon Lsb Industries is expected to generate 1.23 times more return on investment than Solvay SA. However, Lsb Industries is 1.23 times more volatile than Solvay SA. It trades about 0.11 of its potential returns per unit of risk. Solvay SA is currently generating about 0.02 per unit of risk. If you would invest  747.00  in Lsb Industries on September 3, 2024 and sell it today you would earn a total of  136.00  from holding Lsb Industries or generate 18.21% return on investment over 90 days.

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

Lsb Industries  vs.  Solvay SA

Lsb Industries

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lsb Industries are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Lsb Industries unveiled solid returns over the last few months and may actually be approaching a breakup point.

Solvay SA

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Solvay SA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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 Lsb Industries and Solvay SA

The main advantage of trading using opposite Lsb Industries and Solvay SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lsb Industries 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 Lsb Industries 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.