Correlation Between Photocure and SoftOx Solutions

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

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

Diversification Opportunities for Photocure and SoftOx Solutions

0.11

Correlation Coefficient

Photocure  SoftOx Solutions

Average diversification

The 3 months correlation between Photocure and SoftOx is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Photocure and SoftOx Solutions AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SoftOx Solutions and Photocure 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 Photocure 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 Photocure i.e., Photocure and SoftOx Solutions go up and down completely randomly.

Pair Corralation between Photocure and SoftOx Solutions

Assuming the 90 days trading horizon Photocure is expected to generate 35.22 times less return on investment than SoftOx Solutions. But when comparing it to its historical volatility, Photocure is 11.04 times less risky than SoftOx Solutions. It trades about 0.05 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  1.16  in SoftOx Solutions AS on November 29, 2024 and sell it today you would earn a total of  2.18  from holding SoftOx Solutions AS or generate 187.93% return on investment over 90 days.

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

Photocure  vs.  SoftOx Solutions AS

Photocure

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Photocure are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Photocure may actually be approaching a critical reversion point that can send shares even higher in March 2025.

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 Photocure and SoftOx Solutions

The main advantage of trading using opposite Photocure and SoftOx Solutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Photocure 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 Photocure 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.