Correlation Between Soditech and Elior SCA

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

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

Diversification Opportunities for Soditech and Elior SCA

0.42

Correlation Coefficient

Soditech  Elior SCA

Very weak diversification

The 3 months correlation between Soditech and Elior is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Soditech SA and Elior SCA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elior SCA and Soditech 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 Soditech SA are associated (or correlated) with Elior SCA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elior SCA has no effect on the direction of Soditech i.e., Soditech and Elior SCA go up and down completely randomly.

Pair Corralation between Soditech and Elior SCA

Assuming the 90 days trading horizon Soditech SA is expected to under-perform the Elior SCA. In addition to that, Soditech is 1.06 times more volatile than Elior SCA. It trades about -0.32 of its total potential returns per unit of risk. Elior SCA is currently generating about 0.11 per unit of volatility. If you would invest  259.00  in Elior SCA on September 28, 2024 and sell it today you would earn a total of  14.00  from holding Elior SCA or generate 5.41% return on investment over 90 days.

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

Soditech SA  vs.  Elior SCA

Soditech SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Soditech SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Elior SCA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Elior SCA 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 basic 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 Soditech and Elior SCA

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

The idea behind Soditech SA and Elior SCA 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.