Correlation Between Sofina Société and Arrowmark Financial

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

By analyzing existing cross correlation between Sofina Socit Anonyme and Arrowmark Financial Corp, you can compare the effects of market volatilities on Sofina Société and Arrowmark Financial 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 Sofina Société with a short position of Arrowmark Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sofina Société and Arrowmark Financial.

Diversification Opportunities for Sofina Société and Arrowmark Financial

-0.02

Correlation Coefficient

Sofina Société  Arrowmark Financial

Good diversification

The 3 months correlation between Sofina and Arrowmark is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Sofina Socit Anonyme and Arrowmark Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrowmark Financial Corp and Sofina Société 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 Sofina Socit Anonyme are associated (or correlated) with Arrowmark Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arrowmark Financial Corp has no effect on the direction of Sofina Société i.e., Sofina Société and Arrowmark Financial go up and down completely randomly.

Pair Corralation between Sofina Société and Arrowmark Financial

Assuming the 90 days horizon Sofina Socit Anonyme is not expected to generate positive returns. However, Sofina Socit Anonyme is 12.08 times less risky than Arrowmark Financial. It waists most of its returns potential to compensate for thr risk taken. Arrowmark Financial is generating about 0.14 per unit of risk. If you would invest  1,954  in Arrowmark Financial Corp on October 23, 2024 and sell it today you would earn a total of  164.00  from holding Arrowmark Financial Corp or generate 8.39% return on investment over 90 days.

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

Sofina Socit Anonyme  vs.  Arrowmark Financial Corp

Sofina Socit Anonyme

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sofina Socit Anonyme has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Sofina Société is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Arrowmark Financial Corp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Arrowmark Financial Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Arrowmark Financial may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Sofina Société and Arrowmark Financial

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

The idea behind Sofina Socit Anonyme and Arrowmark Financial Corp 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.