Correlation Between Solventum Corp and Newtopia

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

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

Diversification Opportunities for Solventum Corp and Newtopia

-0.47

Correlation Coefficient

Solventum Corp  Newtopia

Very good diversification

The 3 months correlation between Solventum and Newtopia is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Solventum Corp and Newtopia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newtopia and Solventum Corp 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 Solventum Corp are associated (or correlated) with Newtopia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newtopia has no effect on the direction of Solventum Corp i.e., Solventum Corp and Newtopia go up and down completely randomly.

Pair Corralation between Solventum Corp and Newtopia

Given the investment horizon of 90 days Solventum Corp is expected to generate 0.14 times more return on investment than Newtopia. However, Solventum Corp is 7.2 times less risky than Newtopia. It trades about 0.11 of its potential returns per unit of risk. Newtopia is currently generating about -0.03 per unit of risk. If you would invest  6,511  in Solventum Corp on September 4, 2024 and sell it today you would earn a total of  688.00  from holding Solventum Corp or generate 10.57% return on investment over 90 days.

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

Solventum Corp  vs.  Newtopia

Solventum Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Solventum Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating essential indicators, Solventum Corp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Newtopia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Newtopia has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Solventum Corp and Newtopia

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

The idea behind Solventum Corp and Newtopia 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..