Correlation Between Solvay SA and Celanese

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

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

Diversification Opportunities for Solvay SA and Celanese

-0.5

Correlation Coefficient

Solvay SA  Celanese

Very good diversification

The 3 months correlation between Solvay and Celanese is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Solvay SA and Celanese in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Celanese 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 Celanese. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Celanese has no effect on the direction of Solvay SA i.e., Solvay SA and Celanese go up and down completely randomly.

Pair Corralation between Solvay SA and Celanese

Assuming the 90 days horizon Solvay SA is expected to generate 0.67 times more return on investment than Celanese. However, Solvay SA is 1.48 times less risky than Celanese. It trades about 0.1 of its potential returns per unit of risk. Celanese is currently generating about -0.04 per unit of risk. If you would invest  3,139  in Solvay SA on December 29, 2024 and sell it today you would earn a total of  490.00  from holding Solvay SA or generate 15.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.72%
Values	Daily Returns

Solvay SA  vs.  Celanese

Solvay SA

Risk-Adjusted Performance

OK

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

Celanese

Risk-Adjusted Performance

Very Weak

Over the last 90 days Celanese has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Solvay SA and Celanese

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

The idea behind Solvay SA and Celanese 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.