Correlation Between Softronic and FM Mattsson

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

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

Diversification Opportunities for Softronic and FM Mattsson

0.72

Correlation Coefficient

Softronic  FM Mattsson

Poor diversification

The 3 months correlation between Softronic and FMM-B is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Softronic AB and FM Mattsson Mora in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FM Mattsson Mora and Softronic 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 Softronic AB are associated (or correlated) with FM Mattsson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FM Mattsson Mora has no effect on the direction of Softronic i.e., Softronic and FM Mattsson go up and down completely randomly.

Pair Corralation between Softronic and FM Mattsson

Assuming the 90 days trading horizon Softronic AB is expected to generate 0.93 times more return on investment than FM Mattsson. However, Softronic AB is 1.08 times less risky than FM Mattsson. It trades about 0.04 of its potential returns per unit of risk. FM Mattsson Mora is currently generating about 0.0 per unit of risk. If you would invest  2,125  in Softronic AB on September 24, 2024 and sell it today you would earn a total of  210.00  from holding Softronic AB or generate 9.88% return on investment over 90 days.

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

Softronic AB  vs.  FM Mattsson Mora

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 uncertain basic indicators, Softronic may actually be approaching a critical reversion point that can send shares even higher in January 2025.

FM Mattsson Mora

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FM Mattsson Mora has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, FM Mattsson is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Softronic and FM Mattsson

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

The idea behind Softronic AB and FM Mattsson Mora 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.