Correlation Between Mithra Pharmaceuticals and Solvay SA

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

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

Diversification Opportunities for Mithra Pharmaceuticals and Solvay SA

-0.45

Correlation Coefficient

Mithra Pharmaceuticals  Solvay SA

Very good diversification

The 3 months correlation between Mithra and Solvay is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Mithra Pharmaceuticals SA and Solvay SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solvay SA and Mithra Pharmaceuticals 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 Mithra Pharmaceuticals SA are associated (or correlated) with Solvay SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solvay SA has no effect on the direction of Mithra Pharmaceuticals i.e., Mithra Pharmaceuticals and Solvay SA go up and down completely randomly.

Pair Corralation between Mithra Pharmaceuticals and Solvay SA

Assuming the 90 days trading horizon Mithra Pharmaceuticals SA is expected to under-perform the Solvay SA. In addition to that, Mithra Pharmaceuticals is 1.36 times more volatile than Solvay SA. It trades about -0.07 of its total potential returns per unit of risk. Solvay SA is currently generating about 0.17 per unit of volatility. If you would invest  2,827  in Solvay SA on February 6, 2024 and sell it today you would earn a total of  187.00  from holding Solvay SA or generate 6.61% return on investment over 90 days.

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

Mithra Pharmaceuticals SA  vs.  Solvay SA

Mithra Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mithra Pharmaceuticals SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Solvay SA

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Solvay SA are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Solvay SA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mithra Pharmaceuticals and Solvay SA

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

The idea behind Mithra Pharmaceuticals SA and Solvay 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.