Correlation Between Goodtech and SoftOx Solutions

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

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

Diversification Opportunities for Goodtech and SoftOx Solutions

0.86

Correlation Coefficient

Goodtech  SoftOx Solutions

Very poor diversification

The 3 months correlation between Goodtech and SoftOx is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Goodtech and SoftOx Solutions AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SoftOx Solutions and Goodtech 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 Goodtech are associated (or correlated) with SoftOx Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SoftOx Solutions has no effect on the direction of Goodtech i.e., Goodtech and SoftOx Solutions go up and down completely randomly.

Pair Corralation between Goodtech and SoftOx Solutions

Assuming the 90 days trading horizon Goodtech is expected to under-perform the SoftOx Solutions. But the stock apears to be less risky and, when comparing its historical volatility, Goodtech is 3.76 times less risky than SoftOx Solutions. The stock trades about -0.08 of its potential returns per unit of risk. The SoftOx Solutions AS is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  1.76  in SoftOx Solutions AS on September 16, 2024 and sell it today you would lose (0.40) from holding SoftOx Solutions AS or give up 22.73% of portfolio value over 90 days.

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

Goodtech  vs.  SoftOx Solutions AS

Goodtech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Goodtech has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

SoftOx Solutions

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SoftOx Solutions AS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, SoftOx Solutions is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Goodtech and SoftOx Solutions

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

The idea behind Goodtech and SoftOx Solutions AS 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.