Correlation Between Umicore SA and Solvay SA

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

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

Diversification Opportunities for Umicore SA and Solvay SA

0.5

Correlation Coefficient

Umicore SA  Solvay SA

Very weak diversification

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

Pair Corralation between Umicore SA and Solvay SA

Assuming the 90 days trading horizon Umicore SA is expected to generate 2.43 times less return on investment than Solvay SA. In addition to that, Umicore SA is 1.2 times more volatile than Solvay SA. It trades about 0.0 of its total potential returns per unit of risk. Solvay SA is currently generating about 0.01 per unit of volatility. If you would invest  3,145  in Solvay SA on September 15, 2024 and sell it today you would earn a total of  5.00  from holding Solvay SA or generate 0.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.48%
Values	Daily Returns

Umicore SA  vs.  Solvay SA

Umicore SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Umicore SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable forward indicators, Umicore SA is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Solvay SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Solvay SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Solvay SA 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 Umicore SA and Solvay SA

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

The idea behind Umicore SA and Solvay 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.

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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.