Correlation Between Solvay SA and Dupont De

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Can any of the company-specific risk be diversified away by investing in both Solvay SA and Dupont De 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 Dupont De into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Solvay SA and Dupont De Nemours, you can compare the effects of market volatilities on Solvay SA and Dupont De 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 Dupont De. Check out your portfolio center. Please also check ongoing floating volatility patterns of Solvay SA and Dupont De.

Diversification Opportunities for Solvay SA and Dupont De

0.15
  Correlation Coefficient

Average diversification

The 3 months correlation between Solvay and Dupont is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Solvay SA and Dupont De Nemours in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dupont De Nemours 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 Dupont De. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dupont De Nemours has no effect on the direction of Solvay SA i.e., Solvay SA and Dupont De go up and down completely randomly.

Pair Corralation between Solvay SA and Dupont De

Assuming the 90 days horizon Solvay SA is expected to generate 10.29 times less return on investment than Dupont De. In addition to that, Solvay SA is 2.36 times more volatile than Dupont De Nemours. It trades about 0.02 of its total potential returns per unit of risk. Dupont De Nemours is currently generating about 0.56 per unit of volatility. If you would invest  6,922  in Dupont De Nemours on December 29, 2023 and sell it today you would earn a total of  728.00  from holding Dupont De Nemours or generate 10.52% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Solvay SA  vs.  Dupont De Nemours

 Performance 
       Timeline  
Solvay SA 

Risk-Adjusted Performance

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Very Weak
Over the last 90 days Solvay SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.
Dupont De Nemours 

Risk-Adjusted Performance

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Low
 
High
Very Weak
Over the last 90 days Dupont De Nemours has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Dupont De is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Solvay SA and Dupont De Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Solvay SA and Dupont De

The main advantage of trading using opposite Solvay SA and Dupont De positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Solvay SA position performs unexpectedly, Dupont De 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 Dupont De will offset losses from the drop in Dupont De's long position.
The idea behind Solvay SA and Dupont De Nemours 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.

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