Correlation Between Softronic and Fram Skandinavien

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

By analyzing existing cross correlation between Softronic AB and Fram Skandinavien AB, you can compare the effects of market volatilities on Softronic and Fram Skandinavien 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 Fram Skandinavien. Check out your portfolio center. Please also check ongoing floating volatility patterns of Softronic and Fram Skandinavien.

Diversification Opportunities for Softronic and Fram Skandinavien

-0.4

Correlation Coefficient

Softronic  Fram Skandinavien

Very good diversification

The 3 months correlation between Softronic and Fram is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Softronic AB and Fram Skandinavien AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fram Skandinavien 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 Fram Skandinavien. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fram Skandinavien has no effect on the direction of Softronic i.e., Softronic and Fram Skandinavien go up and down completely randomly.

Pair Corralation between Softronic and Fram Skandinavien

Assuming the 90 days trading horizon Softronic AB is expected to under-perform the Fram Skandinavien. But the stock apears to be less risky and, when comparing its historical volatility, Softronic AB is 2.99 times less risky than Fram Skandinavien. The stock trades about -0.03 of its potential returns per unit of risk. The Fram Skandinavien AB is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  755.00  in Fram Skandinavien AB on November 28, 2024 and sell it today you would earn a total of  170.00  from holding Fram Skandinavien AB or generate 22.52% return on investment over 90 days.

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

Softronic AB  vs.  Fram Skandinavien AB

Softronic AB

Risk-Adjusted Performance

Very Weak

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

Fram Skandinavien

Risk-Adjusted Performance

OK

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

Pair Trading with Softronic and Fram Skandinavien

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

The idea behind Softronic AB and Fram Skandinavien 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.