Correlation Between Micro Systemation and FormPipe Software

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

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

Diversification Opportunities for Micro Systemation and FormPipe Software

-0.28

Correlation Coefficient

Micro Systemation  FormPipe Software

Very good diversification

The 3 months correlation between Micro and FormPipe is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Micro Systemation AB and FormPipe Software AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FormPipe Software and Micro Systemation 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 Micro Systemation AB are associated (or correlated) with FormPipe Software. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FormPipe Software has no effect on the direction of Micro Systemation i.e., Micro Systemation and FormPipe Software go up and down completely randomly.

Pair Corralation between Micro Systemation and FormPipe Software

Assuming the 90 days trading horizon Micro Systemation AB is expected to generate 1.01 times more return on investment than FormPipe Software. However, Micro Systemation is 1.01 times more volatile than FormPipe Software AB. It trades about 0.03 of its potential returns per unit of risk. FormPipe Software AB is currently generating about 0.02 per unit of risk. If you would invest  3,992  in Micro Systemation AB on September 24, 2024 and sell it today you would earn a total of  858.00  from holding Micro Systemation AB or generate 21.49% return on investment over 90 days.

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

Micro Systemation AB  vs.  FormPipe Software AB

Micro Systemation

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Micro Systemation AB are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Micro Systemation may actually be approaching a critical reversion point that can send shares even higher in January 2025.

FormPipe Software

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FormPipe Software AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Micro Systemation and FormPipe Software

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

The idea behind Micro Systemation AB and FormPipe Software 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.