Correlation Between Solvay SA and Miko NV

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

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

Diversification Opportunities for Solvay SA and Miko NV

0.72

Correlation Coefficient

Solvay SA  Miko NV

Poor diversification

The 3 months correlation between Solvay and Miko is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Solvay SA and Miko NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Miko NV 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 Miko NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Miko NV has no effect on the direction of Solvay SA i.e., Solvay SA and Miko NV go up and down completely randomly.

Pair Corralation between Solvay SA and Miko NV

Assuming the 90 days trading horizon Solvay SA is expected to generate 0.95 times more return on investment than Miko NV. However, Solvay SA is 1.05 times less risky than Miko NV. It trades about 0.12 of its potential returns per unit of risk. Miko NV is currently generating about -0.04 per unit of risk. If you would invest  1,334  in Solvay SA on February 1, 2024 and sell it today you would earn a total of  1,707  from holding Solvay SA or generate 127.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.25%
Values	Daily Returns

Solvay SA  vs.  Miko NV

Solvay SA

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Solvay SA are ranked lower than 13 (%) 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.

Miko NV

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Miko NV are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Miko NV may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Solvay SA and Miko NV

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

The idea behind Solvay SA and Miko NV 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.

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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.