Correlation Between Sofwave Medical and Insuline Medical

Can any of the company-specific risk be diversified away by investing in both Sofwave Medical and Insuline 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 Insuline 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 Insuline Medical, you can compare the effects of market volatilities on Sofwave Medical and Insuline 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 Insuline Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sofwave Medical and Insuline Medical.

Diversification Opportunities for Sofwave Medical and Insuline Medical

0.46

Correlation Coefficient

Sofwave Medical  Insuline Medical

Very weak diversification

The 3 months correlation between Sofwave and Insuline is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Sofwave Medical and Insuline Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Insuline 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 Insuline Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Insuline Medical has no effect on the direction of Sofwave Medical i.e., Sofwave Medical and Insuline Medical go up and down completely randomly.

Pair Corralation between Sofwave Medical and Insuline Medical

Assuming the 90 days trading horizon Sofwave Medical is expected to under-perform the Insuline Medical. But the stock apears to be less risky and, when comparing its historical volatility, Sofwave Medical is 1.83 times less risky than Insuline Medical. The stock trades about -0.07 of its potential returns per unit of risk. The Insuline Medical is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  22,200  in Insuline Medical on September 28, 2024 and sell it today you would lose (2,600) from holding Insuline Medical or give up 11.71% of portfolio value over 90 days.

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

Sofwave Medical  vs.  Insuline 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 weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Insuline Medical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Insuline 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.

Pair Trading with Sofwave Medical and Insuline Medical

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

The idea behind Sofwave Medical and Insuline 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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.