Correlation Between Sofina Socit and Bpost NV

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

Diversification Opportunities for Sofina Socit and Bpost NV

0.86

Correlation Coefficient

Sofina Socit  Bpost NV

Very poor diversification

The 3 months correlation between Sofina and Bpost is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Sofina Socit Anonyme and Bpost NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bpost NV 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 Bpost NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bpost NV has no effect on the direction of Sofina Socit i.e., Sofina Socit and Bpost NV go up and down completely randomly.

Pair Corralation between Sofina Socit and Bpost NV

Assuming the 90 days trading horizon Sofina Socit Anonyme is expected to generate 0.48 times more return on investment than Bpost NV. However, Sofina Socit Anonyme is 2.07 times less risky than Bpost NV. It trades about -0.25 of its potential returns per unit of risk. Bpost NV is currently generating about -0.15 per unit of risk. If you would invest  25,240  in Sofina Socit Anonyme on September 15, 2024 and sell it today you would lose (4,040) from holding Sofina Socit Anonyme or give up 16.01% of portfolio value over 90 days.

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

Sofina Socit Anonyme  vs.  Bpost NV

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. Even with weak performance in the last few months, the Stock's technical and fundamental 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.

Bpost NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bpost NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Sofina Socit and Bpost NV

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

The idea behind Sofina Socit Anonyme and Bpost 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.