Correlation Between Sofwave Medical and Imed Infinity

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

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

Diversification Opportunities for Sofwave Medical and Imed Infinity

0.42

Correlation Coefficient

Sofwave Medical  Imed Infinity

Very weak diversification

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

Pair Corralation between Sofwave Medical and Imed Infinity

Assuming the 90 days trading horizon Sofwave Medical is expected to under-perform the Imed Infinity. In addition to that, Sofwave Medical is 1.04 times more volatile than Imed Infinity Medical Limited. It trades about -0.3 of its total potential returns per unit of risk. Imed Infinity Medical Limited is currently generating about 0.09 per unit of volatility. If you would invest  9,930  in Imed Infinity Medical Limited on September 27, 2024 and sell it today you would earn a total of  390.00  from holding Imed Infinity Medical Limited or generate 3.93% return on investment over 90 days.

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

Sofwave Medical  vs.  Imed Infinity Medical Limited

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.

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.

Pair Trading with Sofwave Medical and Imed Infinity

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

The idea behind Sofwave Medical and Imed Infinity Medical Limited 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.