Correlation Between Micro Systemation and Softronic

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

Diversification Opportunities for Micro Systemation and Softronic

0.86

Correlation Coefficient

Micro Systemation  Softronic

Very poor diversification

The 3 months correlation between Micro and Softronic is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Micro Systemation AB and Softronic AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Softronic AB 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 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 Micro Systemation i.e., Micro Systemation and Softronic go up and down completely randomly.

Pair Corralation between Micro Systemation and Softronic

Assuming the 90 days trading horizon Micro Systemation AB is expected to generate 1.69 times more return on investment than Softronic. However, Micro Systemation is 1.69 times more volatile than Softronic AB. It trades about 0.11 of its potential returns per unit of risk. Softronic AB is currently generating about 0.1 per unit of risk. If you would invest  4,367  in Micro Systemation AB on August 31, 2024 and sell it today you would earn a total of  733.00  from holding Micro Systemation AB or generate 16.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.46%
Values	Daily Returns

Micro Systemation AB  vs.  Softronic AB

Micro Systemation

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Micro Systemation AB are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Micro Systemation sustained solid returns over the last few months and may actually be approaching a breakup point.

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 weak basic indicators, Softronic may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Micro Systemation and Softronic

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

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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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.