Correlation Between Know IT and Softronic
Can any of the company-specific risk be diversified away by investing in both Know IT and Softronic 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 Know IT and Softronic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Know IT AB and Softronic AB, you can compare the effects of market volatilities on Know IT and Softronic 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 Know IT with a short position of Softronic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Know IT and Softronic.
Diversification Opportunities for Know IT and Softronic
Very good diversification
The 3 months correlation between Know and Softronic is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Know IT AB and Softronic AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Softronic AB and Know IT 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 Know IT AB are associated (or correlated) with Softronic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Softronic AB has no effect on the direction of Know IT i.e., Know IT and Softronic go up and down completely randomly.
Pair Corralation between Know IT and Softronic
Assuming the 90 days trading horizon Know IT AB is expected to generate 1.19 times more return on investment than Softronic. However, Know IT is 1.19 times more volatile than Softronic AB. It trades about -0.01 of its potential returns per unit of risk. Softronic AB is currently generating about -0.11 per unit of risk. If you would invest 14,180 in Know IT AB on November 8, 2024 and sell it today you would lose (80.00) from holding Know IT AB or give up 0.56% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Know IT AB vs. Softronic AB
Performance |
| Timeline |
| Know IT AB |
| Softronic AB |
Know IT and Softronic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Know IT and Softronic
The main advantage of trading using opposite Know IT and Softronic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Know IT position performs unexpectedly, Softronic 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 Softronic will offset losses from the drop in Softronic's long position.| Know IT vs. Enea AB | Know IT vs. Lagercrantz Group AB | Know IT vs. Vitec Software Group | Know IT vs. Addnode Group AB |
| Softronic vs. eWork Group AB | Softronic vs. Novotek AB | Softronic vs. Prevas AB | Softronic vs. Proact IT Group |
Check out your portfolio center.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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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