Correlation Between Scholastic and Solventum Corp

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

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

Diversification Opportunities for Scholastic and Solventum Corp

-0.19

Correlation Coefficient

Scholastic  Solventum Corp

Good diversification

The 3 months correlation between Scholastic and Solventum is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Scholastic and Solventum Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solventum Corp and Scholastic 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 Scholastic are associated (or correlated) with Solventum Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solventum Corp has no effect on the direction of Scholastic i.e., Scholastic and Solventum Corp go up and down completely randomly.

Pair Corralation between Scholastic and Solventum Corp

Given the investment horizon of 90 days Scholastic is expected to under-perform the Solventum Corp. In addition to that, Scholastic is 1.95 times more volatile than Solventum Corp. It trades about -0.1 of its total potential returns per unit of risk. Solventum Corp is currently generating about -0.02 per unit of volatility. If you would invest  7,179  in Solventum Corp on September 14, 2024 and sell it today you would lose (178.00) from holding Solventum Corp or give up 2.48% of portfolio value over 90 days.

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

Scholastic  vs.  Solventum Corp

Scholastic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Scholastic has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's technical indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Solventum Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Solventum Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable essential indicators, Solventum Corp is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Scholastic and Solventum Corp

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

The idea behind Scholastic and Solventum Corp 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..