Correlation Between Sofina Socit and Ontex Group

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

Diversification Opportunities for Sofina Socit and Ontex Group

0.03

Correlation Coefficient

Sofina Socit  Ontex Group

Significant diversification

The 3 months correlation between Sofina and Ontex is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Sofina Socit Anonyme and Ontex Group NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ontex Group 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 Ontex Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ontex Group NV has no effect on the direction of Sofina Socit i.e., Sofina Socit and Ontex Group go up and down completely randomly.

Pair Corralation between Sofina Socit and Ontex Group

Assuming the 90 days trading horizon Sofina Socit Anonyme is expected to generate 0.66 times more return on investment than Ontex Group. However, Sofina Socit Anonyme is 1.53 times less risky than Ontex Group. It trades about 0.39 of its potential returns per unit of risk. Ontex Group NV is currently generating about 0.07 per unit of risk. If you would invest  21,560  in Sofina Socit Anonyme on October 23, 2024 and sell it today you would earn a total of  1,640  from holding Sofina Socit Anonyme or generate 7.61% return on investment over 90 days.

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

Sofina Socit Anonyme  vs.  Ontex Group 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 relatively invariable technical and fundamental indicators, Sofina Socit is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Ontex Group NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ontex Group NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Ontex Group is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sofina Socit and Ontex Group

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

The idea behind Sofina Socit Anonyme and Ontex Group 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.

Check out your portfolio center.

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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.