Correlation Between Solvay SA and Huntsman

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

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

Diversification Opportunities for Solvay SA and Huntsman

-0.04

Correlation Coefficient

Solvay SA  Huntsman

Good diversification

The 3 months correlation between Solvay and Huntsman is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Solvay SA and Huntsman in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huntsman 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 Huntsman. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huntsman has no effect on the direction of Solvay SA i.e., Solvay SA and Huntsman go up and down completely randomly.

Pair Corralation between Solvay SA and Huntsman

Assuming the 90 days horizon Solvay SA is expected to generate 1.1 times more return on investment than Huntsman. However, Solvay SA is 1.1 times more volatile than Huntsman. It trades about 0.1 of its potential returns per unit of risk. Huntsman is currently generating about -0.03 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	Insignificant
Accuracy	96.72%
Values	Daily Returns

Solvay SA  vs.  Huntsman

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.

Huntsman

Risk-Adjusted Performance

Very Weak

Over the last 90 days Huntsman has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Huntsman is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Solvay SA and Huntsman

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

The idea behind Solvay SA and Huntsman 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.