Correlation Between Softronic and Drillcon
Can any of the company-specific risk be diversified away by investing in both Softronic and Drillcon 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 Softronic and Drillcon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Softronic AB and Drillcon AB, you can compare the effects of market volatilities on Softronic and Drillcon 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 Softronic with a short position of Drillcon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Softronic and Drillcon.
Diversification Opportunities for Softronic and Drillcon
Pay attention - limited upside
The 3 months correlation between Softronic and Drillcon is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Softronic AB and Drillcon AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Drillcon AB and Softronic 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 Softronic AB are associated (or correlated) with Drillcon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Drillcon AB has no effect on the direction of Softronic i.e., Softronic and Drillcon go up and down completely randomly.
Pair Corralation between Softronic and Drillcon
Assuming the 90 days trading horizon Softronic AB is expected to generate 0.6 times more return on investment than Drillcon. However, Softronic AB is 1.66 times less risky than Drillcon. It trades about 0.06 of its potential returns per unit of risk. Drillcon AB is currently generating about -0.06 per unit of risk. If you would invest 2,180 in Softronic AB on September 1, 2024 and sell it today you would earn a total of 255.00 from holding Softronic AB or generate 11.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 99.22% |
| Values | Daily Returns |
Softronic AB vs. Drillcon AB
Performance |
| Timeline |
| Softronic AB |
| Drillcon AB |
Softronic and Drillcon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Softronic and Drillcon
The main advantage of trading using opposite Softronic and Drillcon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Softronic position performs unexpectedly, Drillcon 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 Drillcon will offset losses from the drop in Drillcon's long position.| Softronic vs. eWork Group AB | Softronic vs. Novotek AB | Softronic vs. Prevas AB | Softronic vs. Proact IT Group |
| Drillcon vs. Holmen AB | Drillcon vs. Svenska Cellulosa Aktiebolaget | Drillcon vs. Husqvarna AB | Drillcon vs. Alfa Laval 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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