Correlation Between Softimat and Cenergy Holdings

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

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

Diversification Opportunities for Softimat and Cenergy Holdings

0.84

Correlation Coefficient

Softimat  Cenergy Holdings

Very poor diversification

The 3 months correlation between Softimat and Cenergy is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Softimat SA and Cenergy Holdings SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cenergy Holdings and Softimat 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 Softimat SA are associated (or correlated) with Cenergy Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cenergy Holdings has no effect on the direction of Softimat i.e., Softimat and Cenergy Holdings go up and down completely randomly.

Pair Corralation between Softimat and Cenergy Holdings

Assuming the 90 days trading horizon Softimat SA is expected to generate 0.71 times more return on investment than Cenergy Holdings. However, Softimat SA is 1.4 times less risky than Cenergy Holdings. It trades about 0.04 of its potential returns per unit of risk. Cenergy Holdings SA is currently generating about 0.02 per unit of risk. If you would invest  93.00  in Softimat SA on September 23, 2024 and sell it today you would earn a total of  2.00  from holding Softimat SA or generate 2.15% return on investment over 90 days.

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

Softimat SA  vs.  Cenergy Holdings SA

Softimat SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Softimat SA has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Softimat is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Cenergy Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cenergy Holdings SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental drivers 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 Softimat and Cenergy Holdings

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

The idea behind Softimat SA and Cenergy Holdings SA 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.