Correlation Between Sodexo SA and SEB SA

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

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

Diversification Opportunities for Sodexo SA and SEB SA

-0.15

Correlation Coefficient

Sodexo SA  SEB SA

Good diversification

The 3 months correlation between Sodexo and SEB is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Sodexo SA and SEB SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SEB SA and Sodexo 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 Sodexo SA are associated (or correlated) with SEB SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SEB SA has no effect on the direction of Sodexo SA i.e., Sodexo SA and SEB SA go up and down completely randomly.

Pair Corralation between Sodexo SA and SEB SA

Assuming the 90 days horizon Sodexo SA is expected to under-perform the SEB SA. But the stock apears to be less risky and, when comparing its historical volatility, Sodexo SA is 1.19 times less risky than SEB SA. The stock trades about -0.03 of its potential returns per unit of risk. The SEB SA is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  8,980  in SEB SA on November 29, 2024 and sell it today you would earn a total of  365.00  from holding SEB SA or generate 4.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Sodexo SA  vs.  SEB SA

Sodexo SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sodexo SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Sodexo SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

SEB SA

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SEB SA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, SEB SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sodexo SA and SEB SA

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

The idea behind Sodexo SA and SEB 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.

Check out your portfolio center.

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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.