Correlation Between Total Soft and APS Holdings

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

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

Diversification Opportunities for Total Soft and APS Holdings

0.43

Correlation Coefficient

Total Soft  APS Holdings

Very weak diversification

The 3 months correlation between Total and APS is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Total Soft Bank and APS Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on APS Holdings and Total Soft 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 Total Soft Bank are associated (or correlated) with APS Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of APS Holdings has no effect on the direction of Total Soft i.e., Total Soft and APS Holdings go up and down completely randomly.

Pair Corralation between Total Soft and APS Holdings

Assuming the 90 days trading horizon Total Soft Bank is expected to generate 2.61 times more return on investment than APS Holdings. However, Total Soft is 2.61 times more volatile than APS Holdings. It trades about 0.04 of its potential returns per unit of risk. APS Holdings is currently generating about 0.07 per unit of risk. If you would invest  469,000  in Total Soft Bank on September 5, 2024 and sell it today you would earn a total of  20,000  from holding Total Soft Bank or generate 4.26% return on investment over 90 days.

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

Total Soft Bank  vs.  APS Holdings

Total Soft Bank

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Total Soft Bank are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Total Soft may actually be approaching a critical reversion point that can send shares even higher in January 2025.

APS Holdings

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in APS Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, APS Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Total Soft and APS Holdings

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

The idea behind Total Soft Bank and APS Holdings 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.