Correlation Between Sofwave Medical and Ilex Medical

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

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

Diversification Opportunities for Sofwave Medical and Ilex Medical

-0.44

Correlation Coefficient

Sofwave Medical  Ilex Medical

Very good diversification

The 3 months correlation between Sofwave and Ilex is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Sofwave Medical and Ilex Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ilex Medical and Sofwave Medical 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 Sofwave Medical are associated (or correlated) with Ilex Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ilex Medical has no effect on the direction of Sofwave Medical i.e., Sofwave Medical and Ilex Medical go up and down completely randomly.

Pair Corralation between Sofwave Medical and Ilex Medical

Assuming the 90 days trading horizon Sofwave Medical is expected to generate 27.8 times less return on investment than Ilex Medical. In addition to that, Sofwave Medical is 1.41 times more volatile than Ilex Medical. It trades about 0.01 of its total potential returns per unit of risk. Ilex Medical is currently generating about 0.26 per unit of volatility. If you would invest  635,500  in Ilex Medical on September 16, 2024 and sell it today you would earn a total of  186,600  from holding Ilex Medical or generate 29.36% return on investment over 90 days.

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

Sofwave Medical  vs.  Ilex Medical

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 somewhat strong basic indicators, Sofwave Medical is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Ilex Medical

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ilex Medical are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ilex Medical sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sofwave Medical and Ilex Medical

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

The idea behind Sofwave Medical and Ilex 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.