Correlation Between Solvay SA and Umicore SA

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

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

Diversification Opportunities for Solvay SA and Umicore SA

0.57

Correlation Coefficient

Solvay SA  Umicore SA

Very weak diversification

The 3 months correlation between Solvay and Umicore is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Solvay SA and Umicore SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Umicore SA 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 are associated (or correlated) with Umicore SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Umicore SA has no effect on the direction of Solvay SA i.e., Solvay SA and Umicore SA go up and down completely randomly.

Pair Corralation between Solvay SA and Umicore SA

Assuming the 90 days trading horizon Solvay SA is expected to under-perform the Umicore SA. But the stock apears to be less risky and, when comparing its historical volatility, Solvay SA is 1.13 times less risky than Umicore SA. The stock trades about -0.08 of its potential returns per unit of risk. The Umicore SA is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  1,077  in Umicore SA on September 21, 2024 and sell it today you would lose (91.00) from holding Umicore SA or give up 8.45% of portfolio value over 90 days.

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

Solvay SA  vs.  Umicore SA

Solvay SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Solvay SA 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.

Umicore SA

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Solvay SA and Umicore SA

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

The idea behind Solvay SA and Umicore SA 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.