Correlation Between CAG Group and Softronic

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

By analyzing existing cross correlation between CAG Group AB and Softronic AB, you can compare the effects of market volatilities on CAG Group 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 CAG Group with a short position of Softronic. Check out your portfolio center. Please also check ongoing floating volatility patterns of CAG Group and Softronic.

Diversification Opportunities for CAG Group and Softronic

0.66

Correlation Coefficient

CAG Group  Softronic

Poor diversification

The 3 months correlation between CAG and Softronic is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding CAG Group AB and Softronic AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Softronic AB and CAG Group 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 CAG Group AB 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 CAG Group i.e., CAG Group and Softronic go up and down completely randomly.

Pair Corralation between CAG Group and Softronic

Assuming the 90 days trading horizon CAG Group is expected to generate 2.19 times less return on investment than Softronic. But when comparing it to its historical volatility, CAG Group AB is 1.39 times less risky than Softronic. It trades about 0.06 of its potential returns per unit of risk. Softronic AB is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  2,175  in Softronic AB on September 23, 2024 and sell it today you would earn a total of  160.00  from holding Softronic AB or generate 7.36% return on investment over 90 days.

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

CAG Group AB  vs.  Softronic AB

CAG Group AB

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CAG Group AB are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, CAG Group is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Softronic AB

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Softronic AB are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Softronic may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with CAG Group and Softronic

The main advantage of trading using opposite CAG Group and Softronic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CAG Group 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 CAG Group AB 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.

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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.