Correlation Between Sofina Société and Flow Capital

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

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

Diversification Opportunities for Sofina Société and Flow Capital

0.24

Correlation Coefficient

Sofina Société  Flow Capital

Modest diversification

The 3 months correlation between Sofina and Flow is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Sofina Socit Anonyme and Flow Capital Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Flow Capital Corp and Sofina Société 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 Sofina Socit Anonyme are associated (or correlated) with Flow Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Flow Capital Corp has no effect on the direction of Sofina Société i.e., Sofina Société and Flow Capital go up and down completely randomly.

Pair Corralation between Sofina Société and Flow Capital

Assuming the 90 days horizon Sofina Société is expected to generate 4.77 times less return on investment than Flow Capital. But when comparing it to its historical volatility, Sofina Socit Anonyme is 1.59 times less risky than Flow Capital. It trades about 0.02 of its potential returns per unit of risk. Flow Capital Corp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  43.00  in Flow Capital Corp on October 24, 2024 and sell it today you would earn a total of  17.00  from holding Flow Capital Corp or generate 39.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	97.34%
Values	Daily Returns

Sofina Socit Anonyme  vs.  Flow Capital Corp

Sofina Socit Anonyme

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sofina Socit Anonyme has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Sofina Société is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Flow Capital Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Flow Capital Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Flow Capital is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Sofina Société and Flow Capital

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

The idea behind Sofina Socit Anonyme and Flow Capital Corp 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..