Correlation Between Sopra Steria and Axway Software

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

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

Diversification Opportunities for Sopra Steria and Axway Software

-0.39

Correlation Coefficient

Sopra Steria  Axway Software

Very good diversification

The 3 months correlation between Sopra and Axway is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Sopra Steria Group and Axway Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Axway Software and Sopra Steria 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 Sopra Steria Group are associated (or correlated) with Axway Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Axway Software has no effect on the direction of Sopra Steria i.e., Sopra Steria and Axway Software go up and down completely randomly.

Pair Corralation between Sopra Steria and Axway Software

Assuming the 90 days trading horizon Sopra Steria is expected to generate 2.54 times less return on investment than Axway Software. In addition to that, Sopra Steria is 1.12 times more volatile than Axway Software. It trades about 0.03 of its total potential returns per unit of risk. Axway Software is currently generating about 0.09 per unit of volatility. If you would invest  1,331  in Axway Software on September 3, 2024 and sell it today you would earn a total of  1,389  from holding Axway Software or generate 104.36% return on investment over 90 days.

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

Sopra Steria Group  vs.  Axway Software

Sopra Steria Group

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sopra Steria Group are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Sopra Steria is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Axway Software

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Axway Software are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Axway Software sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sopra Steria and Axway Software

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

The idea behind Sopra Steria Group and Axway Software 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.