Correlation Between Solvay SA and Showa Denko
Can any of the company-specific risk be diversified away by investing in both Solvay SA and Showa Denko 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 Showa Denko into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Solvay SA and Showa Denko KK, you can compare the effects of market volatilities on Solvay SA and Showa Denko 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 Showa Denko. Check out your portfolio center. Please also check ongoing floating volatility patterns of Solvay SA and Showa Denko.
Diversification Opportunities for Solvay SA and Showa Denko
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Solvay and Showa is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Solvay SA and Showa Denko KK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Showa Denko KK 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 Showa Denko. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Showa Denko KK has no effect on the direction of Solvay SA i.e., Solvay SA and Showa Denko go up and down completely randomly.
Pair Corralation between Solvay SA and Showa Denko
Assuming the 90 days horizon Solvay SA is expected to generate 1.22 times more return on investment than Showa Denko. However, Solvay SA is 1.22 times more volatile than Showa Denko KK. It trades about 0.1 of its potential returns per unit of risk. Showa Denko KK is currently generating about 0.04 per unit of risk. If you would invest 2,715 in Solvay SA on January 26, 2024 and sell it today you would earn a total of 625.00 from holding Solvay SA or generate 23.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 98.41% |
| Values | Daily Returns |
Solvay SA vs. Showa Denko KK
Performance |
| Timeline |
| Solvay SA |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
OK
| Showa Denko KK |
Solvay SA and Showa Denko Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Solvay SA and Showa Denko
The main advantage of trading using opposite Solvay SA and Showa Denko positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Solvay SA position performs unexpectedly, Showa Denko 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 Showa Denko will offset losses from the drop in Showa Denko's long position.| Solvay SA vs. Orbia Advance | Solvay SA vs. Sumitomo Chemical Co | Solvay SA vs. Braskem SA Class | Solvay SA vs. Dow Inc |
| Showa Denko vs. Tronox Holdings PLC | Showa Denko vs. Green Plains Renewable | Showa Denko vs. AdvanSix | Showa Denko vs. Huntsman |
Check out your portfolio center.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.
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