Correlation Between Smcp SAS and Solocal Group

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

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

Diversification Opportunities for Smcp SAS and Solocal Group

-0.31

Correlation Coefficient

Smcp SAS  Solocal Group

Very good diversification

The 3 months correlation between Smcp and Solocal is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Smcp SAS 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 Smcp SAS 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 Smcp SAS 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 Smcp SAS i.e., Smcp SAS and Solocal Group go up and down completely randomly.

Pair Corralation between Smcp SAS and Solocal Group

Assuming the 90 days trading horizon Smcp SAS is expected to generate 0.93 times more return on investment than Solocal Group. However, Smcp SAS is 1.08 times less risky than Solocal Group. It trades about 0.18 of its potential returns per unit of risk. Solocal Group SA is currently generating about -0.06 per unit of risk. If you would invest  255.00  in Smcp SAS on September 29, 2024 and sell it today you would earn a total of  104.00  from holding Smcp SAS or generate 40.78% return on investment over 90 days.

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

Smcp SAS  vs.  Solocal Group SA

Smcp SAS

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Smcp SAS are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Smcp SAS sustained solid returns over the last few months and may actually be approaching a breakup point.

Solocal Group SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Solocal Group SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Smcp SAS and Solocal Group

The main advantage of trading using opposite Smcp SAS and Solocal Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Smcp SAS 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 Smcp SAS 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 Stocks Directory module to find actively traded stocks across global markets.