Correlation Between Kitron ASA and SoftOx Solutions

Can any of the company-specific risk be diversified away by investing in both Kitron 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 Kitron 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 Kitron ASA and SoftOx Solutions AS, you can compare the effects of market volatilities on Kitron 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 Kitron ASA with a short position of SoftOx Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kitron ASA and SoftOx Solutions.

Diversification Opportunities for Kitron ASA and SoftOx Solutions

0.57

Correlation Coefficient

Kitron ASA  SoftOx Solutions

Very weak diversification

The 3 months correlation between Kitron and SoftOx is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Kitron 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 Kitron 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 Kitron 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 Kitron ASA i.e., Kitron ASA and SoftOx Solutions go up and down completely randomly.

Pair Corralation between Kitron ASA and SoftOx Solutions

Assuming the 90 days trading horizon Kitron ASA is expected to generate 9.88 times less return on investment than SoftOx Solutions. But when comparing it to its historical volatility, Kitron ASA is 12.73 times less risky than SoftOx Solutions. It trades about 0.18 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 Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Kitron ASA  vs.  SoftOx Solutions AS

Kitron ASA

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kitron ASA are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Kitron 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 Kitron ASA and SoftOx Solutions

The main advantage of trading using opposite Kitron ASA and SoftOx Solutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kitron 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 Kitron 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.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.