Correlation Between Solvay Bank and Lyons Bancorp

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

By analyzing existing cross correlation between Solvay Bank Corp and Lyons Bancorp, you can compare the effects of market volatilities on Solvay Bank and Lyons Bancorp 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 Solvay Bank with a short position of Lyons Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Solvay Bank and Lyons Bancorp.

Diversification Opportunities for Solvay Bank and Lyons Bancorp

-0.21

Correlation Coefficient

Solvay Bank  Lyons Bancorp

Very good diversification

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

Pair Corralation between Solvay Bank and Lyons Bancorp

Given the investment horizon of 90 days Solvay Bank Corp is expected to generate 2.72 times more return on investment than Lyons Bancorp. However, Solvay Bank is 2.72 times more volatile than Lyons Bancorp. It trades about 0.08 of its potential returns per unit of risk. Lyons Bancorp is currently generating about -0.01 per unit of risk. If you would invest  2,696  in Solvay Bank Corp on December 27, 2024 and sell it today you would earn a total of  264.00  from holding Solvay Bank Corp or generate 9.79% return on investment over 90 days.

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

Solvay Bank Corp  vs.  Lyons Bancorp

Solvay Bank Corp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Solvay Bank Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady fundamental drivers, Solvay Bank may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Lyons Bancorp

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Solvay Bank and Lyons Bancorp

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

The idea behind Solvay Bank Corp and Lyons Bancorp 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.