Correlation Between Sofina Socit and NV Bekaert

Can any of the company-specific risk be diversified away by investing in both Sofina Socit and NV Bekaert 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 Socit and NV Bekaert 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 NV Bekaert SA, you can compare the effects of market volatilities on Sofina Socit and NV Bekaert 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 Socit with a short position of NV Bekaert. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sofina Socit and NV Bekaert.

Diversification Opportunities for Sofina Socit and NV Bekaert

0.2

Correlation Coefficient

Sofina Socit  NV Bekaert

Modest diversification

The 3 months correlation between Sofina and BEKB is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Sofina Socit Anonyme and NV Bekaert SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NV Bekaert SA and Sofina Socit 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 NV Bekaert. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NV Bekaert SA has no effect on the direction of Sofina Socit i.e., Sofina Socit and NV Bekaert go up and down completely randomly.

Pair Corralation between Sofina Socit and NV Bekaert

Assuming the 90 days trading horizon Sofina Socit Anonyme is expected to generate 0.73 times more return on investment than NV Bekaert. However, Sofina Socit Anonyme is 1.37 times less risky than NV Bekaert. It trades about 0.12 of its potential returns per unit of risk. NV Bekaert SA is currently generating about 0.05 per unit of risk. If you would invest  21,720  in Sofina Socit Anonyme on December 30, 2024 and sell it today you would earn a total of  2,540  from holding Sofina Socit Anonyme or generate 11.69% return on investment over 90 days.

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

Sofina Socit Anonyme  vs.  NV Bekaert SA

Sofina Socit Anonyme

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sofina Socit Anonyme are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical and fundamental indicators, Sofina Socit may actually be approaching a critical reversion point that can send shares even higher in April 2025.

NV Bekaert SA

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NV Bekaert SA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, NV Bekaert may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Sofina Socit and NV Bekaert

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

The idea behind Sofina Socit Anonyme and NV Bekaert 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..