Correlation Between Softronic and Telia Company
Can any of the company-specific risk be diversified away by investing in both Softronic and Telia Company 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 Telia Company into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Softronic AB and Telia Company AB, you can compare the effects of market volatilities on Softronic and Telia Company 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 Telia Company. Check out your portfolio center. Please also check ongoing floating volatility patterns of Softronic and Telia Company.
Diversification Opportunities for Softronic and Telia Company
-0.73 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Softronic and Telia is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Softronic AB and Telia Company AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Telia Company 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 Telia Company. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Telia Company has no effect on the direction of Softronic i.e., Softronic and Telia Company go up and down completely randomly.
Pair Corralation between Softronic and Telia Company
Assuming the 90 days trading horizon Softronic AB is expected to generate 1.13 times more return on investment than Telia Company. However, Softronic is 1.13 times more volatile than Telia Company AB. It trades about 0.1 of its potential returns per unit of risk. Telia Company AB is currently generating about -0.02 per unit of risk. If you would invest 2,220 in Softronic AB on August 30, 2024 and sell it today you would earn a total of 130.00 from holding Softronic AB or generate 5.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Softronic AB vs. Telia Company AB
Performance |
| Timeline |
| Softronic AB |
| Telia Company |
Softronic and Telia Company Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Softronic and Telia Company
The main advantage of trading using opposite Softronic and Telia Company positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Softronic position performs unexpectedly, Telia Company 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 Telia Company will offset losses from the drop in Telia Company's long position.The idea behind Softronic AB and Telia Company 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.| Telia Company vs. Precise Biometrics AB | Telia Company vs. BE Group AB | Telia Company vs. Softronic AB | Telia Company vs. Bjorn Borg 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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