Correlation Between Softronic and NOTE AB

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

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

Diversification Opportunities for Softronic and NOTE AB

0.67

Correlation Coefficient

Softronic  NOTE AB

Poor diversification

The 3 months correlation between Softronic and NOTE is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Softronic AB and NOTE AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NOTE AB and Softronic 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 Softronic AB are associated (or correlated) with NOTE AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NOTE AB has no effect on the direction of Softronic i.e., Softronic and NOTE AB go up and down completely randomly.

Pair Corralation between Softronic and NOTE AB

Assuming the 90 days trading horizon Softronic AB is expected to generate 0.51 times more return on investment than NOTE AB. However, Softronic AB is 1.96 times less risky than NOTE AB. It trades about 0.1 of its potential returns per unit of risk. NOTE AB is currently generating about 0.04 per unit of risk. If you would invest  2,175  in Softronic AB on September 12, 2024 and sell it today you would earn a total of  190.00  from holding Softronic AB or generate 8.74% return on investment over 90 days.

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

Softronic AB  vs.  NOTE AB

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 uncertain basic indicators, Softronic may actually be approaching a critical reversion point that can send shares even higher in January 2025.

NOTE AB

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NOTE AB are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, NOTE AB may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Softronic and NOTE AB

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

The idea behind Softronic AB and NOTE 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.