Correlation Between Imed Infinity and Sofwave Medical

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

By analyzing existing cross correlation between Imed Infinity Medical Limited and Sofwave Medical, you can compare the effects of market volatilities on Imed Infinity and Sofwave Medical 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 Imed Infinity with a short position of Sofwave Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Imed Infinity and Sofwave Medical.

Diversification Opportunities for Imed Infinity and Sofwave Medical

0.42

Correlation Coefficient

Imed Infinity  Sofwave Medical

Very weak diversification

The 3 months correlation between Imed and Sofwave is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Imed Infinity Medical Limited and Sofwave Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sofwave Medical and Imed Infinity 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 Imed Infinity Medical Limited are associated (or correlated) with Sofwave Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sofwave Medical has no effect on the direction of Imed Infinity i.e., Imed Infinity and Sofwave Medical go up and down completely randomly.

Pair Corralation between Imed Infinity and Sofwave Medical

Assuming the 90 days trading horizon Imed Infinity Medical Limited is expected to generate 0.64 times more return on investment than Sofwave Medical. However, Imed Infinity Medical Limited is 1.55 times less risky than Sofwave Medical. It trades about -0.05 of its potential returns per unit of risk. Sofwave Medical is currently generating about -0.06 per unit of risk. If you would invest  10,860  in Imed Infinity Medical Limited on September 27, 2024 and sell it today you would lose (540.00) from holding Imed Infinity Medical Limited or give up 4.97% of portfolio value over 90 days.

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

Imed Infinity Medical Limited  vs.  Sofwave Medical

Imed Infinity Medical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Imed Infinity Medical Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Imed Infinity is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Sofwave Medical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sofwave Medical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Imed Infinity and Sofwave Medical

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

The idea behind Imed Infinity Medical Limited and Sofwave Medical 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.