Correlation Between SoftOx Solutions and Hofseth Biocare

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

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

Diversification Opportunities for SoftOx Solutions and Hofseth Biocare

0.75

Correlation Coefficient

SoftOx Solutions  Hofseth Biocare

Poor diversification

The 3 months correlation between SoftOx and Hofseth is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding SoftOx Solutions AS and Hofseth Biocare ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hofseth Biocare ASA and SoftOx Solutions 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 SoftOx Solutions AS are associated (or correlated) with Hofseth Biocare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hofseth Biocare ASA has no effect on the direction of SoftOx Solutions i.e., SoftOx Solutions and Hofseth Biocare go up and down completely randomly.

Pair Corralation between SoftOx Solutions and Hofseth Biocare

Assuming the 90 days trading horizon SoftOx Solutions AS is expected to generate 1.86 times more return on investment than Hofseth Biocare. However, SoftOx Solutions is 1.86 times more volatile than Hofseth Biocare ASA. It trades about -0.01 of its potential returns per unit of risk. Hofseth Biocare ASA is currently generating about -0.15 per unit of risk. If you would invest  1.90  in SoftOx Solutions AS on September 12, 2024 and sell it today you would lose (0.44) from holding SoftOx Solutions AS or give up 23.16% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

SoftOx Solutions AS  vs.  Hofseth Biocare ASA

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 latest conflicting performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Hofseth Biocare ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hofseth Biocare ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's fundamental indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with SoftOx Solutions and Hofseth Biocare

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

The idea behind SoftOx Solutions AS and Hofseth Biocare ASA 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.