Correlation Between Prodways Group and Solocal Group

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

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

Diversification Opportunities for Prodways Group and Solocal Group

0.28

Correlation Coefficient

Prodways Group  Solocal Group

Modest diversification

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

Pair Corralation between Prodways Group and Solocal Group

Assuming the 90 days trading horizon Prodways Group SA is expected to under-perform the Solocal Group. But the stock apears to be less risky and, when comparing its historical volatility, Prodways Group SA is 1.66 times less risky than Solocal Group. The stock trades about -0.09 of its potential returns per unit of risk. The Solocal Group SA is currently generating about 0.02 of returns per unit of risk over similar time horizon. 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

Prodways Group SA  vs.  Solocal Group SA

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.

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.

Pair Trading with Prodways Group and Solocal Group

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

The idea behind Prodways Group SA and Solocal 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.