Correlation Between Soitec SA and Prodways Group

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

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

Diversification Opportunities for Soitec SA and Prodways Group

0.36

Correlation Coefficient

Soitec SA  Prodways Group

Weak diversification

The 3 months correlation between Soitec and Prodways is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Soitec SA and Prodways Group SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prodways Group SA and Soitec SA 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 Soitec SA are associated (or correlated) with Prodways Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prodways Group SA has no effect on the direction of Soitec SA i.e., Soitec SA and Prodways Group go up and down completely randomly.

Pair Corralation between Soitec SA and Prodways Group

Assuming the 90 days trading horizon Soitec SA is expected to under-perform the Prodways Group. But the stock apears to be less risky and, when comparing its historical volatility, Soitec SA is 1.12 times less risky than Prodways Group. The stock trades about -0.02 of its potential returns per unit of risk. The Prodways Group SA is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  52.00  in Prodways Group SA on October 8, 2024 and sell it today you would earn a total of  9.00  from holding Prodways Group SA or generate 17.31% return on investment over 90 days.

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

Soitec SA  vs.  Prodways Group SA

Soitec SA

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Soitec SA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong forward indicators, Soitec SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Prodways Group SA

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Prodways Group SA are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Prodways Group sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Soitec SA and Prodways Group

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

The idea behind Soitec SA and Prodways 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.