Correlation Between Proact IT and Softronic
Can any of the company-specific risk be diversified away by investing in both Proact 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 Proact IT and Softronic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Proact IT Group and Softronic AB, you can compare the effects of market volatilities on Proact 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 Proact IT with a short position of Softronic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Proact IT and Softronic.
Diversification Opportunities for Proact IT and Softronic
Modest diversification
The 3 months correlation between Proact and Softronic is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Proact IT Group and Softronic AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Softronic AB and Proact 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 Proact IT Group 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 Proact IT i.e., Proact IT and Softronic go up and down completely randomly.
Pair Corralation between Proact IT and Softronic
Assuming the 90 days trading horizon Proact IT is expected to generate 3.34 times less return on investment than Softronic. But when comparing it to its historical volatility, Proact IT Group is 1.2 times less risky than Softronic. It trades about 0.05 of its potential returns per unit of risk. Softronic AB is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 2,255 in Softronic AB on October 31, 2024 and sell it today you would earn a total of 85.00 from holding Softronic AB or generate 3.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Proact IT Group vs. Softronic AB
Performance |
| Timeline |
| Proact IT Group |
| Softronic AB |
Proact IT and Softronic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Proact IT and Softronic
The main advantage of trading using opposite Proact IT and Softronic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Proact 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.The idea behind Proact IT Group and Softronic 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.| Softronic vs. Greater Than AB | Softronic vs. Diadrom Holding AB | Softronic vs. Corline Biomedical AB | Softronic vs. BIMobject AB |
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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