Correlation Between H M and Softronic

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

By analyzing existing cross correlation between H M Hennes and Softronic AB, you can compare the effects of market volatilities on H M and Softronic 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 H M with a short position of Softronic. Check out your portfolio center. Please also check ongoing floating volatility patterns of H M and Softronic.

Diversification Opportunities for H M and Softronic

-0.49

Correlation Coefficient

H M  Softronic

Very good diversification

The 3 months correlation between HM-B and Softronic is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding H M Hennes and Softronic AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Softronic AB and H M 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 H M Hennes are associated (or correlated) with Softronic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Softronic AB has no effect on the direction of H M i.e., H M and Softronic go up and down completely randomly.

Pair Corralation between H M and Softronic

Assuming the 90 days trading horizon H M Hennes is expected to under-perform the Softronic. In addition to that, H M is 1.01 times more volatile than Softronic AB. It trades about -0.04 of its total potential returns per unit of risk. Softronic AB is currently generating about 0.1 per unit of volatility. If you would invest  2,245  in Softronic AB on August 31, 2024 and sell it today you would earn a total of  190.00  from holding Softronic AB or generate 8.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

H M Hennes  vs.  Softronic AB

H M Hennes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days H M Hennes has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, H M is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Softronic AB

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Softronic AB are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Softronic may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with H M and Softronic

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

The idea behind H M Hennes and Softronic AB 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.