Correlation Between Ageas SANV and Solvay SA

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

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

Diversification Opportunities for Ageas SANV and Solvay SA

0.88

Correlation Coefficient

Ageas SANV  Solvay SA

Very poor diversification

The 3 months correlation between Ageas and Solvay is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding ageas SANV and Solvay SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solvay SA and Ageas SANV 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 ageas SANV 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 Ageas SANV i.e., Ageas SANV and Solvay SA go up and down completely randomly.

Pair Corralation between Ageas SANV and Solvay SA

Assuming the 90 days trading horizon ageas SANV is expected to under-perform the Solvay SA. But the stock apears to be less risky and, when comparing its historical volatility, ageas SANV is 1.94 times less risky than Solvay SA. The stock trades about -0.02 of its potential returns per unit of risk. The Solvay SA is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  2,771  in Solvay SA on February 4, 2024 and sell it today you would earn a total of  243.00  from holding Solvay SA or generate 8.77% return on investment over 90 days.

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

ageas SANV  vs.  Solvay SA

ageas SANV

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ageas SANV are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Ageas SANV reported solid returns over the last few months and may actually be approaching a breakup point.

Solvay SA

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Solvay SA are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Solvay SA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ageas SANV and Solvay SA

The main advantage of trading using opposite Ageas SANV and Solvay SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ageas SANV 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 ageas SANV 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.