Correlation Between Soditech and Parx Plastics

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

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

Diversification Opportunities for Soditech and Parx Plastics

0.21

Correlation Coefficient

Soditech  Parx Plastics

Modest diversification

The 3 months correlation between Soditech and Parx is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Soditech SA and Parx Plastics NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parx Plastics NV and Soditech 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 Soditech SA are associated (or correlated) with Parx Plastics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Parx Plastics NV has no effect on the direction of Soditech i.e., Soditech and Parx Plastics go up and down completely randomly.

Pair Corralation between Soditech and Parx Plastics

Assuming the 90 days trading horizon Soditech SA is expected to under-perform the Parx Plastics. In addition to that, Soditech is 1.83 times more volatile than Parx Plastics NV. It trades about -0.01 of its total potential returns per unit of risk. Parx Plastics NV is currently generating about 0.01 per unit of volatility. If you would invest  29.00  in Parx Plastics NV on October 25, 2024 and sell it today you would earn a total of  0.00  from holding Parx Plastics NV or generate 0.0% return on investment over 90 days.

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

Soditech SA  vs.  Parx Plastics NV

Soditech SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Soditech SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, Soditech is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Parx Plastics NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Parx Plastics NV has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Parx Plastics 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 Soditech and Parx Plastics

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

The idea behind Soditech SA and Parx Plastics NV 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..