Correlation Between Sonetel AB and West International

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

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

Diversification Opportunities for Sonetel AB and West International

0.1

Correlation Coefficient

Sonetel AB  West International

Average diversification

The 3 months correlation between Sonetel and West is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Sonetel AB and West International AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on West International and Sonetel AB 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 Sonetel AB are associated (or correlated) with West International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of West International has no effect on the direction of Sonetel AB i.e., Sonetel AB and West International go up and down completely randomly.

Pair Corralation between Sonetel AB and West International

Assuming the 90 days trading horizon Sonetel AB is expected to generate 1.41 times more return on investment than West International. However, Sonetel AB is 1.41 times more volatile than West International AB. It trades about 0.02 of its potential returns per unit of risk. West International AB is currently generating about -0.08 per unit of risk. If you would invest  484.00  in Sonetel AB on September 16, 2024 and sell it today you would earn a total of  2.00  from holding Sonetel AB or generate 0.41% return on investment over 90 days.

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

Sonetel AB  vs.  West International AB

Sonetel AB

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sonetel AB are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Sonetel AB may actually be approaching a critical reversion point that can send shares even higher in January 2025.

West International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days West International AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Sonetel AB and West International

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

The idea behind Sonetel AB and West International AB 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 Stocks Directory module to find actively traded stocks across global markets.