Correlation Between TKH Group and Sofina Socit

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

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

Diversification Opportunities for TKH Group and Sofina Socit

0.7

Correlation Coefficient

TKH Group  Sofina Socit

Poor diversification

The 3 months correlation between TKH and Sofina is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding TKH Group NV and Sofina Socit Anonyme in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sofina Socit Anonyme and TKH Group 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 TKH Group NV are associated (or correlated) with Sofina Socit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sofina Socit Anonyme has no effect on the direction of TKH Group i.e., TKH Group and Sofina Socit go up and down completely randomly.

Pair Corralation between TKH Group and Sofina Socit

Assuming the 90 days trading horizon TKH Group NV is expected to under-perform the Sofina Socit. In addition to that, TKH Group is 1.55 times more volatile than Sofina Socit Anonyme. It trades about -0.06 of its total potential returns per unit of risk. Sofina Socit Anonyme is currently generating about 0.08 per unit of volatility. If you would invest  22,980  in Sofina Socit Anonyme on October 25, 2024 and sell it today you would earn a total of  1,300  from holding Sofina Socit Anonyme or generate 5.66% return on investment over 90 days.

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

TKH Group NV  vs.  Sofina Socit Anonyme

TKH Group NV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TKH Group NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Sofina Socit Anonyme

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sofina Socit Anonyme are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, Sofina Socit is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with TKH Group and Sofina Socit

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

The idea behind TKH Group NV and Sofina Socit Anonyme 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.