Correlation Between Solvay SA and Campine

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

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

Diversification Opportunities for Solvay SA and Campine

-0.31

Correlation Coefficient

Solvay SA  Campine

Very good diversification

The 3 months correlation between Solvay and Campine is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Solvay SA and Campine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Campine 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 Campine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Campine has no effect on the direction of Solvay SA i.e., Solvay SA and Campine go up and down completely randomly.

Pair Corralation between Solvay SA and Campine

Assuming the 90 days trading horizon Solvay SA is expected to generate 1.17 times less return on investment than Campine. In addition to that, Solvay SA is 1.02 times more volatile than Campine. It trades about 0.2 of its total potential returns per unit of risk. Campine is currently generating about 0.24 per unit of volatility. If you would invest  6,700  in Campine on February 4, 2024 and sell it today you would earn a total of  700.00  from holding Campine or generate 10.45% return on investment over 90 days.

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

Solvay SA  vs.  Campine

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.

Campine

Risk-Adjusted Performance

0 of 100

Very Weak

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

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

The idea behind Solvay SA and Campine 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.