Correlation Between Soft World and MacroWell OMG

Can any of the company-specific risk be diversified away by investing in both Soft World and MacroWell OMG 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 Soft World and MacroWell OMG into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Soft World International and MacroWell OMG Digital, you can compare the effects of market volatilities on Soft World and MacroWell OMG 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 Soft World with a short position of MacroWell OMG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Soft World and MacroWell OMG.

Diversification Opportunities for Soft World and MacroWell OMG

0.81

Correlation Coefficient

Soft World  MacroWell OMG

Very poor diversification

The 3 months correlation between Soft and MacroWell is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Soft World International and MacroWell OMG Digital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MacroWell OMG Digital and Soft World 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 Soft World International are associated (or correlated) with MacroWell OMG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MacroWell OMG Digital has no effect on the direction of Soft World i.e., Soft World and MacroWell OMG go up and down completely randomly.

Pair Corralation between Soft World and MacroWell OMG

Assuming the 90 days trading horizon Soft World International is expected to generate 0.74 times more return on investment than MacroWell OMG. However, Soft World International is 1.35 times less risky than MacroWell OMG. It trades about -0.43 of its potential returns per unit of risk. MacroWell OMG Digital is currently generating about -0.33 per unit of risk. If you would invest  13,500  in Soft World International on October 8, 2024 and sell it today you would lose (1,050) from holding Soft World International or give up 7.78% of portfolio value over 90 days.

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

Soft World International  vs.  MacroWell OMG Digital

Soft World International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Soft World International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Soft World is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

MacroWell OMG Digital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MacroWell OMG Digital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, MacroWell OMG is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Soft World and MacroWell OMG

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

The idea behind Soft World International and MacroWell OMG Digital 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.