Correlation Between Etablissementen Franz and Sofina Socit

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

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

Diversification Opportunities for Etablissementen Franz and Sofina Socit

0.06

Correlation Coefficient

Etablissementen Franz  Sofina Socit

Significant diversification

The 3 months correlation between Etablissementen and Sofina is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Etablissementen Franz Colruyt 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 Etablissementen Franz 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 Etablissementen Franz Colruyt 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 Etablissementen Franz i.e., Etablissementen Franz and Sofina Socit go up and down completely randomly.

Pair Corralation between Etablissementen Franz and Sofina Socit

Assuming the 90 days trading horizon Etablissementen Franz Colruyt is expected to generate 1.64 times more return on investment than Sofina Socit. However, Etablissementen Franz is 1.64 times more volatile than Sofina Socit Anonyme. It trades about -0.12 of its potential returns per unit of risk. Sofina Socit Anonyme is currently generating about -0.3 per unit of risk. If you would invest  4,297  in Etablissementen Franz Colruyt on September 19, 2024 and sell it today you would lose (547.00) from holding Etablissementen Franz Colruyt or give up 12.73% of portfolio value over 90 days.

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

Etablissementen Franz Colruyt  vs.  Sofina Socit Anonyme

Etablissementen Franz

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Etablissementen Franz Colruyt has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Sofina Socit Anonyme

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sofina Socit Anonyme has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's technical and fundamental indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Etablissementen Franz and Sofina Socit

The main advantage of trading using opposite Etablissementen Franz and Sofina Socit positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Etablissementen Franz 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 Etablissementen Franz Colruyt 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.