Correlation Between Solvay SA and Barco NV

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

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

Diversification Opportunities for Solvay SA and Barco NV

0.88

Correlation Coefficient

Solvay SA  Barco NV

Very poor diversification

The 3 months correlation between Solvay and Barco is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Solvay SA and Barco NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barco NV and Solvay 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 Solvay SA are associated (or correlated) with Barco NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Barco NV has no effect on the direction of Solvay SA i.e., Solvay SA and Barco NV go up and down completely randomly.

Pair Corralation between Solvay SA and Barco NV

Assuming the 90 days trading horizon Solvay SA is expected to generate 1.44 times less return on investment than Barco NV. But when comparing it to its historical volatility, Solvay SA is 1.23 times less risky than Barco NV. It trades about 0.09 of its potential returns per unit of risk. Barco NV is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,027  in Barco NV on December 30, 2024 and sell it today you would earn a total of  178.00  from holding Barco NV or generate 17.33% return on investment over 90 days.

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

Solvay SA  vs.  Barco NV

Solvay SA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Solvay SA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Solvay SA may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Barco NV

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Barco NV are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Barco NV reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Solvay SA and Barco NV

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

The idea behind Solvay SA and Barco 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.