Correlation Between First Graphene and Solvay SA

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

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

Diversification Opportunities for First Graphene and Solvay SA

0.19

Correlation Coefficient

First Graphene  Solvay SA

Average diversification

The 3 months correlation between First and Solvay is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding First Graphene and Solvay SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solvay SA ADR and First Graphene 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 First Graphene 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 ADR has no effect on the direction of First Graphene i.e., First Graphene and Solvay SA go up and down completely randomly.

Pair Corralation between First Graphene and Solvay SA

Assuming the 90 days horizon First Graphene is expected to under-perform the Solvay SA. In addition to that, First Graphene is 4.25 times more volatile than Solvay SA ADR. It trades about -0.06 of its total potential returns per unit of risk. Solvay SA ADR is currently generating about -0.02 per unit of volatility. If you would invest  348.00  in Solvay SA ADR on August 31, 2024 and sell it today you would lose (15.00) from holding Solvay SA ADR or give up 4.31% of portfolio value over 90 days.

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

First Graphene  vs.  Solvay SA ADR

First Graphene

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Graphene has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's technical indicators remain nearly stable which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Solvay SA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Solvay SA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Solvay SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with First Graphene and Solvay SA

The main advantage of trading using opposite First Graphene and Solvay SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Graphene 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 First Graphene and Solvay SA ADR 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.