Correlation Between Umicore SA and Floridienne

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

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

Diversification Opportunities for Umicore SA and Floridienne

0.34

Correlation Coefficient

Umicore SA  Floridienne

Weak diversification

The 3 months correlation between Umicore and Floridienne is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Umicore SA and Floridienne in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Floridienne and Umicore 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 Umicore SA are associated (or correlated) with Floridienne. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Floridienne has no effect on the direction of Umicore SA i.e., Umicore SA and Floridienne go up and down completely randomly.

Pair Corralation between Umicore SA and Floridienne

Assuming the 90 days trading horizon Umicore SA is expected to under-perform the Floridienne. But the stock apears to be less risky and, when comparing its historical volatility, Umicore SA is 1.01 times less risky than Floridienne. The stock trades about -0.05 of its potential returns per unit of risk. The Floridienne is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  64,000  in Floridienne on September 22, 2024 and sell it today you would earn a total of  1,500  from holding Floridienne or generate 2.34% return on investment over 90 days.

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

Umicore SA  vs.  Floridienne

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.

Floridienne

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Floridienne are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Floridienne is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Umicore SA and Floridienne

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

The idea behind Umicore SA and Floridienne 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.