Correlation Between Princeton Capital and Sofina Société

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

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

Diversification Opportunities for Princeton Capital and Sofina Société

-0.23

Correlation Coefficient

Princeton Capital  Sofina Société

Very good diversification

The 3 months correlation between Princeton and Sofina is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Princeton Capital 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 Princeton Capital 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 Princeton Capital 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 Princeton Capital i.e., Princeton Capital and Sofina Société go up and down completely randomly.

Pair Corralation between Princeton Capital and Sofina Société

Given the investment horizon of 90 days Princeton Capital is expected to generate 2.37 times less return on investment than Sofina Société. In addition to that, Princeton Capital is 5.59 times more volatile than Sofina Socit Anonyme. It trades about 0.01 of its total potential returns per unit of risk. Sofina Socit Anonyme is currently generating about 0.1 per unit of volatility. If you would invest  22,900  in Sofina Socit Anonyme on December 21, 2024 and sell it today you would earn a total of  1,570  from holding Sofina Socit Anonyme or generate 6.86% return on investment over 90 days.

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

Princeton Capital  vs.  Sofina Socit Anonyme

Princeton Capital

Risk-Adjusted Performance

Very Weak

Over the last 90 days Princeton Capital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Princeton Capital is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Sofina Socit Anonyme

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sofina Socit Anonyme are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Sofina Société may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Princeton Capital and Sofina Société

The main advantage of trading using opposite Princeton Capital and Sofina Société positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Princeton Capital 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 Princeton Capital 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.