Correlation Between Sleep Cycle and FormPipe Software

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

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

Diversification Opportunities for Sleep Cycle and FormPipe Software

0.63

Correlation Coefficient

Sleep Cycle  FormPipe Software

Poor diversification

The 3 months correlation between Sleep and FormPipe is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Sleep Cycle 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 Sleep Cycle 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 Sleep Cycle 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 Sleep Cycle i.e., Sleep Cycle and FormPipe Software go up and down completely randomly.

Pair Corralation between Sleep Cycle and FormPipe Software

Assuming the 90 days trading horizon Sleep Cycle AB is expected to under-perform the FormPipe Software. But the stock apears to be less risky and, when comparing its historical volatility, Sleep Cycle AB is 1.27 times less risky than FormPipe Software. The stock trades about -0.15 of its potential returns per unit of risk. The FormPipe Software AB is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  2,604  in FormPipe Software AB on October 3, 2024 and sell it today you would lose (314.00) from holding FormPipe Software AB or give up 12.06% of portfolio value over 90 days.

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

Sleep Cycle AB  vs.  FormPipe Software AB

Sleep Cycle AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sleep Cycle AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

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 uncertain 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 Sleep Cycle and FormPipe Software

The main advantage of trading using opposite Sleep Cycle and FormPipe Software positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sleep Cycle 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 Sleep Cycle 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.

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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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.