Correlation Between Aega ASA and SoftOx Solutions

Can any of the company-specific risk be diversified away by investing in both Aega ASA and SoftOx Solutions 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 Aega ASA and SoftOx Solutions into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Aega ASA and SoftOx Solutions AS, you can compare the effects of market volatilities on Aega ASA and SoftOx Solutions 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 Aega ASA with a short position of SoftOx Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aega ASA and SoftOx Solutions.

Diversification Opportunities for Aega ASA and SoftOx Solutions

-0.16

Correlation Coefficient

Aega ASA  SoftOx Solutions

Good diversification

The 3 months correlation between Aega and SoftOx is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Aega ASA and SoftOx Solutions AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SoftOx Solutions and Aega ASA 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 Aega ASA are associated (or correlated) with SoftOx Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SoftOx Solutions has no effect on the direction of Aega ASA i.e., Aega ASA and SoftOx Solutions go up and down completely randomly.

Pair Corralation between Aega ASA and SoftOx Solutions

Assuming the 90 days trading horizon Aega ASA is expected to generate 11.37 times less return on investment than SoftOx Solutions. But when comparing it to its historical volatility, Aega ASA is 2.18 times less risky than SoftOx Solutions. It trades about 0.03 of its potential returns per unit of risk. SoftOx Solutions AS is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1.40  in SoftOx Solutions AS on December 30, 2024 and sell it today you would earn a total of  2.66  from holding SoftOx Solutions AS or generate 190.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	75.0%
Values	Daily Returns

Aega ASA  vs.  SoftOx Solutions AS

Aega ASA

Risk-Adjusted Performance

Weak

Over the last 90 days Aega ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite conflicting essential indicators, Aega ASA disclosed solid returns over the last few months and may actually be approaching a breakup point.

SoftOx Solutions

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SoftOx Solutions AS are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, SoftOx Solutions displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aega ASA and SoftOx Solutions

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

The idea behind Aega ASA and SoftOx Solutions AS 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 Global Correlations module to find global opportunities by holding instruments from different markets.