Correlation Between Solvay SA and Orbia AdvanceSAB

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

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

Diversification Opportunities for Solvay SA and Orbia AdvanceSAB

0.16

Correlation Coefficient

Solvay SA  Orbia AdvanceSAB

Average diversification

The 3 months correlation between Solvay and Orbia is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Solvay SA ADR and Orbia Advance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orbia AdvanceSAB 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 ADR are associated (or correlated) with Orbia AdvanceSAB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orbia AdvanceSAB has no effect on the direction of Solvay SA i.e., Solvay SA and Orbia AdvanceSAB go up and down completely randomly.

Pair Corralation between Solvay SA and Orbia AdvanceSAB

Assuming the 90 days horizon Solvay SA ADR is expected to generate 0.63 times more return on investment than Orbia AdvanceSAB. However, Solvay SA ADR is 1.58 times less risky than Orbia AdvanceSAB. It trades about 0.0 of its potential returns per unit of risk. Orbia Advance is currently generating about -0.1 per unit of risk. If you would invest  348.00  in Solvay SA ADR on September 3, 2024 and sell it today you would lose (7.00) from holding Solvay SA ADR or give up 2.01% of portfolio value over 90 days.

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

Solvay SA ADR  vs.  Orbia Advance

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.

Orbia AdvanceSAB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Orbia Advance 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 technical indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Solvay SA and Orbia AdvanceSAB

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

The idea behind Solvay SA ADR and Orbia Advance 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.